House of Commons Foreign Affairs Committee
UK–Brazil Relations
Ninth Report of Session 2010–12
Report, together with formal minutes, oral and written evidence
Ordered by the House of Commons to be printed 11 October 2011
HC 949 Published on 18 October 2011 by authority of the House of Commons London: The Stationery Office Limited £15.50
The Foreign Affairs Committee
The Foreign Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Foreign and Commonwealth Office and its associated agencies.
Current membership Richard Ottaway (Conservative, Croydon South) (Chair) Rt Hon Bob Ainsworth (Labour, Coventry North East) Mr John Baron (Conservative, Basildon and Billericay) Rt Hon Sir Menzies Campbell (Liberal Democrats, North East Fife) Rt Hon Ann Clwyd (Labour, Cynon Valley) Mike Gapes (Labour, Ilford South) Andrew Rosindell (Conservative, Romford) Mr Frank Roy (Labour, Motherwell and Wishaw) Rt Hon Sir John Stanley (Conservative, Tonbridge and Malling) Rory Stewart (Conservative, Penrith and The Border) Mr Dave Watts (Labour, St Helens North)
The following Member was also a member of the Committee during the parliament:
Emma Reynolds (Labour, Wolverhampton North East)
Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.
Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including news items) are on the internet at www.parliament.uk/facom. A list of Reports of the Committee in the present Parliament is at the front of this volume.
The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume.
Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee are Mr Kenneth Fox (Clerk), Mr Eliot Barrass (Second Clerk), Dr Brigid Fowler (Committee Specialist), Ms Zoe Oliver-Watts (Committee Specialist), Mr Richard Dawson (Senior Committee Assistant), Jacqueline Cooksey (Committee Assistant), Mrs Catherine Close (Committee Assistant) and Mr Alex Paterson (Media Officer).
Contacts All correspondence should be addressed to the Clerk of the Foreign Affairs Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 6394; the Committee’s email address is [email protected]
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Contents
Report Page
Summary 3
Conclusions and recommendations 5
1 Introduction 9
2 Government policy towards Brazil 11 Why is the FCO promoting a stronger bilateral relationship? 11 What is the nature of the relationship and how is it being strengthened? 13 Practical measures which the FCO could take 17
3 Brazil as a global power 22 Reform of the United Nations Security Council 23
4 The Falkland Islands 29
5 Commercial relations between the UK and Brazil 31 Barriers to trade 34 EU-Mercosur Free Trade Agreement 35 The energy sector 36
6 Security and criminality 40 Human rights concerns 41
7 Environmental concerns 45
8 Conclusion 48
Formal Minutes 49
Witnesses 50
List of printed written evidence 50
List of unprinted evidence 51
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Summary
The Government is correct to pursue a stronger bilateral relationship with Brazil. The growing political and economic importance of Brazil represents an opportunity for the UK, not a threat, and Brazil’s increasing economic power and political influence is very much a “good news” story for the UK and the wider world. Brazil is a democratic, well-governed, responsible state, unthreatening to its neighbours and with much to contribute to the international community. The Government’s work so far is welcome but should only be the beginning of what should be a long-term effort. The FCO should maintain its focus on Brazil despite recent world events.
The UK’s explicit support for Brazil’s permanent membership of the UN Security Council, as part of wider UN reform, is to be welcomed. Brazil has a potentially valuable role to play on the global stage, drawing upon the prestige and legitimacy conferred by its rising economy, its commitment to democracy, and its status and experience as a member of the developing “South”. We welcome the recent development of Brazilian foreign policy under President Dilma Rousseff, particularly with regards to the promotion of human rights in other countries.
We regret that the Brazilian government has recently adopted a less helpful attitude with regard to the Falkland Islands, as evidenced by the recent refusal by the Brazilian authorities to allow the Royal Navy vessel, HMS Clyde, to dock in Rio de Janeiro. The FCO have yet to provide us with precise details as to why the Clyde was turned away. We recommend that they do so.
The Government is right to target the commercial opportunities that a stronger trading relationship with Brazil will bring. While measures have been put in place to increase trade, the target of doubling trade by 2015 is somewhat arbitrary. UKTI should continue to highlight the opportunity that Brazil brings to UK firms, particularly in the energy sector, and educate UK firms wishing to trade with Brazil on the difficulties inherent in the market. The FCO should continue to push for the completion of negotiations on the proposed EU-Mercosur Free-Trade Agreement.
Brazil is playing an increasingly important and leading role in regional anti-drug efforts. The UK should continue to provide support in this area and more resources for SOCA’s work in Brazil. We note with concern that a gap remains between some of Brazil’s international commitments to human rights and their implementation. UK Ministers should continue to raise this issue during their bilateral visits.
We welcome Brazil’s leadership role on international solutions to tackle climate change and the work of the FCO in promoting and supporting this position. We look forward to continuing close co-operation between the UK and Brazil on climate change, and hope that this forms the basis for a long-term relationship based on shared values.
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Conclusions and recommendations
1. We welcome the Government’s public commitment to a stronger bilateral relationship with Brazil. The growing political and economic importance of Brazil represents an opportunity for the UK, not a threat. We conclude that the Government is correct to identify the opportunities that Brazil’s rise brings. We recommend that it continue to invest effort in revitalising the UK’s relations with Brazil, notwithstanding any temptation to redeploy resources to other parts of the world, such as the Middle East and North Africa, where momentous events have been occurring. (Paragraph 14)
2. We conclude that the efforts made by the Government to strengthen the UK’s bilateral relationship with Brazil are welcome. We note that the forthcoming London Olympic and Paralympic Games will be invaluable in bringing the UK and Brazil closer together. We further conclude that while the Government’s efforts are to be welcomed, they should be only the beginning. We recommend that the Government view its aspiration to enhance the UK-Brazil relationship as one requiring a long- term commitment to maintain the recent momentum. We will continue to monitor developments in the bilateral relationship throughout this Parliament. (Paragraph 27)
3. A double taxation agreement between the UK and Brazil would not alter the commercial relationship between the two countries overnight, but it would be of practical assistance to UK companies trading in Brazil and be an important symbolic step in highlighting the importance that the UK Government is placing on the improved trade links. We recommend that the Government continue to lobby hard on this issue during upcoming Ministerial visits and at the annual UK-Brazil Joint Economic and Trade Committee meeting. (Paragraph 32)
4. We conclude that the Government’s proposed changes to student visa entry requirements may make it more difficult for Brazilian students to study in the UK, at the very time when the Brazilian government is proposing to increase the number of Brazilians studying aboard. We recommend that the FCO explore with the Home Office what steps can be taken to ensure that the new visa regime does not prevent suitably qualified bona fide Brazilian students from entering the UK to study. We further recommend that, in its response to this Report, the FCO inform us of the outcome of these discussions. (Paragraph 39)
5. Given the importance that Brazil is placing on a successful outcome to the forthcoming Rio+20 Conference, we conclude that the conference represents a golden opportunity for the UK to show its commitment to a stronger bilateral relationship. We recommend that British Ministers, diplomats and officials should liaise closely with their Brazilian counterparts during the run-up to Rio+20, not only to maximise the chances of a successful outcome to the conference but, as an ancillary benefit, further to enhance UK-Brazil relations. We welcome the work of our colleagues on the Environmental Audit Committee in this area. (Paragraph 42)
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6. We conclude that the UK’s explicit support for Brazil’s permanent membership of the UN Security Council, as part of wider UN reform, is to be welcomed. We believe that Brazil has a potentially valuable role to play on the global stage, drawing upon the prestige and legitimacy conferred by its rising economy, its commitment to democracy, and its status and experience as a member of the developing “South”. We recommend that the Government should continue to seek to act in close partnership with Brazil at the UN and in other international fora, and should encourage Brazil increasingly to take on the responsibilities associated with being a major global power. In this context we welcome the recent development of Brazilian foreign policy under President Dilma Rousseff, particularly with regards to the promotion of human rights in other countries. (Paragraph 64)
7. The turning away of a Royal Naval vessel is a serious matter. We regret that the Brazilian government felt it necessary to take such action. While we accept the UK Government’s position that they would prefer to discuss such matters in private and “away from the full glare of media and public scrutiny”, we note with disappointment their reticence on this matter in correspondence with us. (Paragraph 70)
8. While we are confident that the FCO has in place procedures to prevent a recurrence of this unfortunate development, we have yet to be told precisely why diplomatic clearance was refused for HMS Clyde, however we note that the scheduled arrival of the Clyde clashed with a meeting between the Brazil and Argentinean Presidents. We recommend that, in response to this Report the FCO tell us exactly why clearance was refused and what procedures are now in place, including a guarantee that in future such applications are overseen by a diplomat of an appropriate level of seniority in order to mitigate against such failings in future. (Paragraph 71)
9. We conclude that the Government is right to point to the rich opportunities available for British companies willing to develop their trading links with Brazil. The Government target of doubling trade over the next five years is clearly an arbitrary one, as evidenced by the fact that the same target has been picked for increasing UK trade with five other major countries. It is, in effect, simply an indication of intent to use the influence of government to maximise trade opportunities for British companies over this period. We welcome the steps taken by both the previous and the present Government to encourage trade, including the setting up of JETCO and the Brazil-UK CEO Forum. We hope the JETCO will prove a useful forum by which best practice on reducing corruption may be shared with Brazilian businesses. (Paragraph 89)
10. We recommend that the Government, via UKTI, continue to invest in providing advice to prospective exporters to Brazil, concerning how best to penetrate the Brazilian market, recognising in particular the need for companies to maintain a strong local presence, to retain adequate numbers of Portuguese-speaking staff, and to have the expertise on hand to navigate Brazilian bureaucracy and commercial law. (Paragraph 90)
11. We conclude that the potential inherent in a free trade agreement between the EU and Mercosur is immense. While we acknowledge the difficulties which exist in the
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negotiations, we urge the FCO to continue to work towards securing an agreement which will give EU firms a large advantage in a huge market. We recommend that, in its response to this Report, the FCO provide us with an update on negotiations. (Paragraph 95)
12. We note that some larger UK firms, notably BG Group and Rolls-Royce, have had some successes in penetrating the growing Brazilian energy market. We congratulate them on this success and hope that this is a precursor to further trade by UK firms. The role of UKTI in promoting the Brazilian energy sector as an opportunity for UK investment will be crucial. We recommend that in its response to this Report the FCO inform us of UKTI’s work in Brazil, with a particular emphasis on the energy sector. (Paragraph 103)
13. We are pleased to note SOCA’s long-term presence and continuing work in Brazil. We recommend that, given Brazil’s increasing importance as a drug trafficking “hub”, SOCA focus more work and resources in Brazil to prevent the problem escalating further. We conclude that Brazil’s active leadership role in co-ordinating a regional response is a welcome development and is further evidence of Brazil’s increasing capacity to play a leadership role on international issues. We recommend that the FCO should publicly welcome and support this leadership role. (Paragraph 109)
14. We conclude that a gap remains between some of Brazil’s international commitments to human rights and their implementation. We recommend that the Government take advantage of the planned series of ministerial visits to continue to raise the implementation of human rights with Brazilian ministers. During our visit we heard informally that a lack of philanthropic culture in Brazilian society means that human rights charities and organisations are dependent on funding from the Brazilian government. We therefore recommend that the FCO should consider making a contribution to the funding of Brazilian human rights NGOs and in its reply to us update us on its work in this regard. (Paragraph 116)
15. We welcome Brazil’s leadership role on international solutions to tackle climate change and the work of the FCO in promoting and supporting this position. We look forward to continuing close co-operation between the UK and Brazil on climate change, and hope that this forms the basis for a long-term relationship based on shared values. We recommend that the FCO continue to build and strengthen this relationship and push towards further agreements at the upcoming Rio+20 and Durban Conferences. (Paragraph 124)
16. The FCO’s announced commitment to a stronger bilateral relationship between the UK and Brazil is much overdue and very welcome. The rise of Brazil represents a great opportunity for the UK, both as a source of a strong commercial relationship and in providing an increasingly important partner in tackling global issues. The potential commercial benefits are well known and understood, but in areas such as energy security, the environment and tackling international crime, a stronger bilateral relationship with Brazil will also be of great benefit to the UK. (Paragraph 125)
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17. It will be clear from our Report that Brazil’s increasing economic power and political influence is very much a “good news” story for the UK and the wider world. The overall assessment must be that Brazil is a democratic, well-governed, responsible state, unthreatening to its neighbours and with much to contribute to the international community. Nonetheless, it would have been remiss of us if we failed to deal with a number of issues which have the potential to undermine or deflect development of the desired stronger bilateral relationship. We hope that the UK Government will take such steps as are within its power to encourage Brazil further to improve its internal human rights record, to tackle problems of corruption, and to maintain a balanced and moderate stance on the Falkland Islands. (Paragraph 126)
18. A closer bilateral relationship between the UK and Brazil can only be achieved over the medium term through sustained pressure and effort. The UK’s present strategy towards Brazil is encouraging; we urge the Government not to allow momentum to be dissipated or its attention to be distracted by more dramatic developments elsewhere in the world. We will continue to monitor developments throughout the current Parliament. (Paragraph 127)
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1 Introduction
1. The Government has committed itself to revitalising relations between the UK and Latin America in general and Brazil in particular. Shortly after coming to office, in June 2010, the Government announced that it would “seek close engagement with [...] Brazil”.1 In November 2010, the Foreign Secretary, Rt Hon William Hague MP, giving the “Canning Lecture” at Canning House, stated that:
Now is the time for Britain at last to think afresh about Latin America and the opportunities it presents for political co-operation and trade and investment that will benefit all our citizens.
He went on to say that the Government would focus its diplomatic efforts on creating a stronger relationship between the UK and Latin America.
Latin America must be a key focus of a foreign policy that seeks, as ours does, to build up new and strengthened relations in the world in pursuit of prosperity and security.2
2. In July 2010 we agreed to conduct an inquiry into UK-Brazil Relations early in the Parliament. This inquiry would build on work by our predecessor Committee in the last Parliament into the relationship between the UK and the other so-called “BRIC” countries,3 Russia, India and China.4
3. On 2 March 2011 we held an informal private seminar with Mr Angus Lapsley, Director, Americas, and Mr Matt Field, Head of Brazil and Southern Cone Team, Foreign and Commonwealth Office (FCO), and separately with Professor Anthony Pereira, King’s College, London, Michael Reid, The Economist, and Silio Boccanera, O Globo. We are grateful to the participants in this seminar, which helped us to take decisions on the scope of the inquiry.
4. On 31 March we announced terms of reference for the inquiry. The Committee would examine the following topics:
• Brazil as an international actor. Brazil’s interaction with the UN and its role on the international stage on issues such as nuclear non-proliferation;
• Trade. The role of UKTI in promoting trade in Brazil, and the experience of British companies who have attempted trading in Brazil;
• The environment. Brazil’s management of the rainforest, and bilateral and multilateral efforts to prevent climate change; including the Cancun Conference;
1 FCO Business Plan Update, June 2011 2 Foreign Secretary, Canning Lecture, Canning House, 9 November 2010. Canning House is the home of the Hispanic and Luso Brazilian Council http://www.canninghouse.org/ 3 BRIC is an acronym standing for “Brazil, Russia, India and China”. 4 See: Foreign Affairs Committee, Seventh Report of Session 2005–06, East Asia, HC 860; Foreign Affairs Committee, Fourth Report of Session 2006–07, South Asia, HC 55; and Foreign Affairs Committee, Second Report of Session 2007–08, Global Security: Russia, HC 51.
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• Energy security. The discovery of large stocks of oil and gas in Brazilian waters;
• Security and criminality. Brazil’s role as a regional power in areas such as the Falklands and the prevention of the transit of narcotics through South America into Britain.
5. We held three evidence sessions with expert witnesses and the relevant Minister. These were as follows:
• On 27 April we took evidence from Mr Neil Atkinson of Datamonitor, Paul Domjan, an energy consultant working for John Howell and Company, and Dr Frank Rosillo- Calle, a research fellow specialising in energy production at Imperial College, London, on the topic of energy security; Mark Bishop of SOCA on the topic of security and criminality; and David Norman and Dr Sandra Charity of WWF on the environment;
• On 11 May we took evidence from Nicholas Armour and Tony Lamb, UKTI, and Philip Brown from the Department for Business, Innovation and Skills, on trade matters, and Professor Andrew Hurrell, University of Oxford, and Dr Marieke Riethof, University of Liverpool, on Brazil as an international actor.
• Our final oral evidence session took place on 8 June when we took evidence from Jeremy Browne MP, the FCO Minister with responsibility for South America. Mr Browne was accompanied by Angus Lapsley, Director, Americas, and Vivien Life, Acting Director of the Prosperity Directorate, FCO.
We received 11 pieces of written evidence. We would like to thank all those individuals and organisations who gave written and oral evidence to our inquiry.
6. We concluded our inquiry with a visit to Brazil on 13–17 June. We held meetings with interlocutors in Rio de Janeiro, Brasília and São Paulo. The itinerary of our visit is annexed to this Report. We would like to thank all our interlocutors during the visit, as well as the staff of the British Embassy and other FCO posts in Brazil who did an excellent job in organising the visit.
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2 Government policy towards Brazil
Why is the FCO promoting a stronger bilateral relationship? 7. The Government’s stated emphasis on relations with Brazil aims to reverse a long-term pattern in diplomatic relations whereby the UK has “disengaged” from Latin America. At the time of the First World War, 50% of foreign investment in Latin America was British, while 20% of Latin America’s total trade was with the UK. At present, by contrast, just over 1% of international exports to Latin America are from the UK. In his Canning Lecture, the Foreign Secretary noted that, the UK’s “trade with Brazil—a country of almost 200 million people—is less than half our trade with Denmark” and Germany exports nearly four times as much to Latin America as the UK. This long-term pattern of economic disengagement has been matched diplomatically. Since 1998 the FCO has closed four British embassies in the region. This long period of disengagement has reduced the UK’s influence in the region, Brazil in particular; according to Jeremy Browne, “in many regards we are behind the Germans, the Italians, and even smaller European countries like the Netherlands, in aspects of our relationship with Brazil”.5
8. The FCO’s renewed emphasis on the bilateral relationship stems from a growing awareness that, in the words of the Foreign Secretary, “Brazil matters”.6 Brazil’s growing economic strength is leading to a global recognition of its actual and potential diplomatic power. While the Foreign Secretary has identified Latin American countries as “one of the undisputed engines of the international economy”, and Mr Browne has noted that “Brazil is the market leader. Its GDP is more than half the total GDP of South America,” the FCO has also identified Brazil as important to other areas of the UK’s vital interests. In his Canning Lecture, Mr Hague identified a strong working relationship with Brazil as vital to the UK’s interests with regards to:
• International relations. “We are in a new phase in the concert of nations, in which states that have not traditionally dominated or sought dominance have an equal role to play in world affairs. [...] we cannot protect the interests of British citizens unless we look beyond Europe and North America.”
• Trade and investment. “We will look for new economic opportunities, encouraging investment in the UK, working to raise the profile of the region with British business, and helping British business access markets in the region.”
• Ecology. Latin America countries contain “at least 40% of the world’s remaining rainforest, 35% of global reserves of freshwater and 25% of the world’s cultivatable land.”
• Security, including issues of drug trafficking.7
5 Q 122 6 Foreign Secretary, Canning Lecture, Canning House, 9 November 2010 7 All quotes are from the Foreign Secretary’s “Canning Lecture” of 10 November.
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9. Our witnesses agreed that the FCO was right to focus on Brazil as a growing power and had correctly identified the ways in which Brazil’s rise was likely to directly impact on the UK’s interests.8
10. Our witnesses were unanimous in their assessment of Brazil’s importance in global energy markets. They noted the discovery of large offshore oil deposits in Brazilian waters. Mr Atkinson told us that “Brazil is going to have an increasingly important role to play in the global oil and gas picture for the next 20 or 30 years or so”.9 Mr Domjan agreed, calling the recent discoveries important on a “global scale”.10 Dr Rosillo-Calle told us that “in future Brazil is going to be a major player [in the energy sector], I am convinced of that”.11
11. With regard to criminality, Mark Bishop of SOCA told us that “the 40 large container ports on its coast have led to it [Brazil] becoming a major transit route for cocaine from South America to mainland Europe and Africa”.12 Mr Bishop also identified Brazil’s importance as a source of organised immigration crime, money laundering and cybercrime.13 Mr Bishop further noted that the Brazilian federal police were focused on tackling the problems caused by cocaine production in South America.14
12. Representatives of UKTI stressed the commercial importance of Brazil. Nicholas Armour suggested that Brazil’s economic growth was the key determinant in the UK’s commitment to the area, “Brazil is a designated high-growth market for UKTI [...] It is a BRIC for no other reason than it is a high-growth market.”15
13. Dr Riethof gave an overview of Brazil’s growing importance in global politics:
Brazil is a growing and booming economy. [...] Apart from the economic importance of Brazil, it is also a regional and international player. Regionally, it is strengthening relations with neighbouring countries and promoting regional integration, not just economically but politically. It uses that regional integration to promote its own global role.
Globally, Brazil’s economic importance is crucial, but it is trying in various other ways to establish its international reputation. [...] It also has an extensive range of relations—formal and informal—with countries around the world.16
14. We welcome the Government’s public commitment to a stronger bilateral relationship with Brazil. The growing political and economic importance of Brazil represents an opportunity for the UK, not a threat. We conclude that the Government is correct to identify the opportunities that Brazil’s rise brings. We recommend that it
8 See: Q 2, Q 22, Q 63, Q 66 and Q 95. 9 Q 2 10 Q 2 11 Q 2 12 Q 22 13 Q 33 14 Q 30 15 Q 66 16 Q 95
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continue to invest effort in revitalising the UK’s relations with Brazil, notwithstanding any temptation to redeploy resources to other parts of the world, such as the Middle East and North Africa, where momentous events have been occurring.
What is the nature of the relationship and how is it being strengthened? 15. The FCO is broadly optimistic about the current nature of the bilateral relationship and its potential for future growth. Its written evidence describes the relationship as “good, but under-developed”.17 Jeremy Browne told us that:
When I was in Brazil about three weeks ago, it was quite striking that the general view of Brazilian opinion formers [...] was that they were well disposed towards Britain. They probably look more towards Europe than towards other countries in South America for inspiration, whether on politics, culture or anything else. We do not, however, have a privileged place. [...] Brazil is well disposed towards us, but it does not give us automatic bonus points that are not earned in terms of our relationship with it. We have a good opportunity, but it is up to us to take it.18
Mr Browne also suggested that the UK benefited from “a high degree of compatibility between our political approach and that of the Brazilians”. This compatibility made it more likely that a strong bilateral relationship, based on “common values”, would be formed, the result being that “in political, values and economic terms, there is a greater marriage between what we offer and what the Brazilians require—therefore, to the mutual benefit of both of us—than may be the case with some other countries”.19
16. The Government’s specific ambitions with regards to the bilateral relationship are set out in a “more strategic, cross-Whitehall approach to Brazil” which has been agreed by the National Security Council sub-committee on the Emerging Powers (NSC(EP)). This strategy aims to deliver a “step-change” in the relationship by 2015. In particular the Government aims for:
• The doubling of UK exports to Brazil from £2 billion per annum to £4 billion;
• The UK to become one of the top 10 recipients of Brazilian FDI [foreign direct investment];
• UK companies to win major contracts for World Cup 2014 and Rio 2016 Olympics;
• A sharp increase in UK–Brazil research and development collaboration, particularly in high-tech spin-outs and SMEs [small and medium enterprises];
17 Ev 44, para 5 18 Q 122 19 Q 125
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• An ambitious EU-Mercosur20 Free Trade Agreement, and progress towards a successful Doha round;
• London 2012 [Olympics] increasing positive perceptions of the UK in Brazil, 50% more Brazilian tourists visiting UK per year;
• Closer co-operation with Brazil on climate change, biodiversity and deforestation;
• UK–Brazil co-operation on development in other regions, especially Africa; and
• Greater UK–Brazil collaboration on international security challenges, on the UN Security Council and in other bodies.21
17. Jeremy Browne told us that to achieve these aims the Government was seeking to “increase engagement across the board”. This includes an increase in UK diplomatic representation in Brazil and more regular Ministerial visits. The table below sets out which Ministerial visits to Brazil have taken place since the start of the present Parliament:
Date Minister August 2010 Vince Cable, Secretary of State for Business, Innovation and Skills Gerald Howarth, Minister for International Security Strategy September 2010 (MOD) February 2011 Lord Brittan, Prime Minister’s Special Adviser on Trade Baroness Neville-Jones, Minister of State for Security and April 2011 Counter Terrorism (Home Office)
Caroline Spelman, Secretary of State for the Environment, Food April 2011 and Rural Affairs (DEFRA)
Gerald Howarth, Minister for International Security Strategy April 2011 (MOD) May 2011 Jeremy Browne, Minister of State, FCO Nick Clegg, Deputy Prime Minister, accompanied by David Willetts, Minister of State, BIS, Jeremy Hunt, Secretary of State, June 2011 Culture, Media and Sport and Jeremy Browne, Minister of State, FCO October 2011 Simon Burns, Minister of State, Department of Health
In addition, the Lord Mayor of London led a business delegation to Brazil in June 2011 and in September 2011, the Prime Minister and Foreign Secretary held bilateral meetings with their Brazilian counterparts.
18. The FCO described for us the British Government’s representation in Brazil:
The UK is currently represented in Brazil with, an Embassy in the capital Brasília, and Consulates in São Paulo (focused on commercial work generally) and Rio de Janeiro (focused on consular work, the energy sector, defence sales and the opportunities arising from the London-Rio Olympics and the World Cup in Brazil).
20 Mercosur (or Mercosul) is a free-trade bloc founded in 1991 and incorporating Argentina, Brazil, Paraguay and Uruguay. 21 Ev 44, para 4
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There are also small commercial offices in Recife and Porto Alegre. There are currently 28 UK-based staff in the network, and 233 locally-engaged staff (including a large guard force).22
In addition, the British Council—which is funded in part by a direct grant from the FCO— maintains a presence in Brazil. It has 39 staff based in the country, in four locations (Brasília, São Paulo, Rio de Janeiro and Recife). The British Council’s Brazil operation has a budget of £3.35 million in 2011/12, of which £2.5 million is FCO direct grant-in-aid.23
19. Changes to the FCO’s global network were laid out in an oral statement by the Foreign Secretary on 11 May 2011. Mr Hague announced that the UK Government “will also expand substantially our diplomatic strength in Brazil [and] open a new Consulate- General in Brazil at Recife.”24 He further indicated that “about half [of the additional staff allocated to] countries such as Brazil, Turkey, Mexico and Indonesia—will be UK-based.”25 The FCO’s Director, Americas, Mr Angus Lapsley, told us that:
we will be putting probably five to six additional diplomats into the Brazilian network over the next 12 months or so. We are going through recruitment processes at the moment, making sure that they have the right language skills and things like that. In terms of absorption capacity and actually making sure that we are putting people in who have real jobs to do, that feels about right to me.26
Mr Lapsley also told us that as well as increasing the size of the UK diplomatic presence in Brazil, the FCO had also “upgraded” the post of Ambassador to reflect the country’s growing importance:
The job of Ambassador in Brazil is now one of the top jobs in the Foreign Office. It is one of the 10 or so SMS327 or director-general level ambassadorships. It really is one of the most highly sought-after jobs.28
20. During our session, as well as discussing the future plans for the FCO’s diplomatic representation in Brazil, we also questioned the Minister on the FCO’s past performance. Jeremy Browne conceded that, previously, the FCO had not always adopted the correct tactics and tone to achieve its diplomatic ends and had perhaps been too focused on issues such as climate change to the detriment of “traditional” diplomacy. He told us that this would change:
this Government has shifted the emphasis away from what I described as campaign- mode diplomacy—important though some campaigns are—towards trying to make sure that we get the core basics right, in terms of our diplomatic offering.29
22 Ev 45, para 7 23 Ev 65 24 HC Deb, 11 May 2011, cols 1166–67 25 HC Deb, 11 May 2001, col 1171 26 Q 141 [Angus Lapsley] 27 SMS3 is an FCO staff grade equivalent to the Civil Service grade SCS3, broadly “Director General” level in the Home Civil Service and on a salary of between £101,500 and £208,200 (as of 8 August). HL Deb, 23 November 2010, col 300WA and cabinetoffice.gov.uk (accessed 8 August 2011). 28 Q 127 [Angus Lapsley]
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When it was put to him in questioning that in the past the UK’s diplomatic representation in Brazil had been less successful than that of Germany and Italy in “penetrating the Brazilian elite”, Mr Browne replied “you are right to make the observations about Germany and Italy”. He noted that “the Brazilian political establishment, civil service, and diplomatic service are high calibre, impressive operators, and we need to ensure that we engage effectively at a level that is likely to maximise our influence”. 30 Mr Lapsley told us that there was a need to put “extra people in to do basic political economy work, so that we really understand what is happening in Brazil”.31 To remedy this failing, the Minister told us of his ambition to change the internal workings of the FCO to ensure that the highest calibre of candidates applied for postings to Latin America.32
The Olympic Games 21. The FCO has identified the London 2012 Olympic and Paralympic Games as an event which will improve perceptions of the UK across the world. We have commented on the FCO’s strategy for exploiting the Games in our recent Report on FCO Public Diplomacy: The Olympic and Paralympic Games 2012.33 Given that the next Olympic Games, in 2016, will take place in Rio de Janeiro, the FCO has acknowledged the opportunity for the shared experiences to bring the UK and Brazil closer together:
The adjacent hosting of the summer Olympics in London (2012) and Rio de Janeiro (2016) provides an important point of contact in the relationship. Brazilian organisers at the state and federal level have a keen interest in seeing firsthand how the UK has prepared itself.34
Jeremy Browne elaborated on this theme:
I showed the Brazilian Ambassador around the [Olympic] park, and he seemed very impressed with the ideas that we had. We are working closely with them at lots of different levels and will continue to do so. Brazilians will see it in receptions a year before the games and no doubt there will be pictures in Brazilian newspapers. It is a nice showcase for Britain in that way, but there is a much more detailed working relationship with the Brazilians, because they are taking over the games from us in 2016.35
22. He went on to suggest that the Olympics were one of the key topics of conversation between him and his Brazilian counterparts.36
29 Q 126 30 Q 126 31 Q 127 [Angus Lapsley] 32 Q 127 [Jeremy Browne] 33 Foreign Affairs Committee, Second Report of Session 2010–12, FCO Public Diplomacy: The Olympic and Paralympic Games 2012, HC 581 34 Ev 45, para 8 35 Q 162 36 Q 162
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23. As well as diplomatic benefits, our witnesses also identified the commercial opportunities the Olympic Games were bringing to UK businesses. Nicholas Armour of UKTI told us that “the 2016 Rio Olympics, associated with the 2014 World Cup, present a wide range of business opportunities”.37 He added that they had provided an opening for close collaboration between the UK and Brazilian Olympic authorities:
We ... can always have better co-operation, but, given that they are trying to run the Olympics in just over a year’s time, they understand the importance of that and it is a collaboration that works.38
24. Mr Armour suggested that the Olympics would be a major opportunity for UK SMEs to trade with Brazil by acting as part of the supply chain for larger UK firms who have received major contracts.39
25. Jeremy Browne highlighted the opportunity for British firms to sell “soft infrastructure” to the Brazilian authorities: “it is a massive business opportunity in all kinds of areas— project management, design and security. Selling millions of tickets on the internet for example throws up all kinds of issues about cyber-security, banking and distribution systems and pricing mechanisms.”40
26. To promote the UK’s “soft power” in connection with the London Olympics—which bills itself as the “greenest” ever—the FCO has run an “Olympic Sustainability Exchange” to share London’s experience of “embedding sustainability” within the Olympic Games with the organisers of the Rio event.
27. We conclude that the efforts made by the Government to strengthen the UK’s bilateral relationship with Brazil are welcome. We note that the forthcoming London Olympic and Paralympic Games will be invaluable in bringing the UK and Brazil closer together. We further conclude that while the Government’s efforts are to be welcomed, they should be only the beginning. We recommend that the Government view its aspiration to enhance the UK-Brazil relationship as one requiring a long-term commitment to maintain the recent momentum. We will continue to monitor developments in the bilateral relationship throughout this Parliament.
Practical measures which the FCO could take 28. While we are supportive of the efforts that the FCO has already taken to improve and strengthen the bilateral relationship, these labours will take time to bear fruit. During our inquiry we have identified three areas where the Government can act almost immediately to strengthen the relationship. We set these out below:
37 Q 66 38 Q 89 39 Q 90 40 Q 162
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Double taxation agreements 29. Double taxation agreements provide certainty of treatment for cross-border economic activity and prevent fiscal discrimination against UK business interests abroad. They aim to protect against the risk of “double taxation” which occurs because of the clashing of domestic laws; for example, some countries assess tax on worldwide income derived by residents, while other countries assess tax on income having a source in their country, similarly more than one country may regard the same taxpayer as resident in their country.41 This type of taxation can raise a barrier to the exchange of goods and services and the movement of capital and persons between countries. Persons will be unwilling to provide capital, goods or services in an overseas country if they are likely to be taxed on the income derived both in that country and in their country of residence.
30. The UK is a signatory to double taxation agreements with over 100 countries and is committed to their promotion elsewhere. Negotiations on a double taxation treaty between the UK and Brazil are ongoing. We have heard informally that the UK is keener on signing such an agreement than Brazil. Despite the benefits to bilateral trade, countries may be averse to signing a double taxation agreement because of national sovereignty considerations or a lack of “mutuality”, a feeling that one party to the agreement may benefit disproportionately.
31. In correspondence with us the Government told us on 15 August that “There are presently no negotiations taking place on a double taxation agreement” and that previous negotiations had failed “owing to the differing treaty policies of the two countries.” However, the UK and Brazil have negotiated a Tax Information Exchange Agreement42 which is due to be signed later this year.43
32. A double taxation agreement between the UK and Brazil would not alter the commercial relationship between the two countries overnight, but it would be of practical assistance to UK companies trading in Brazil and be an important symbolic step in highlighting the importance that the UK Government is placing on the improved trade links. We recommend that the Government continue to lobby hard on this issue during upcoming Ministerial visits and at the annual UK-Brazil Joint Economic and Trade Committee meeting.
Changes to student visa regulations 33. In March 2011, the Home Secretary announced changes to the student visa system, so- called Tier 4 immigration. The changes announced included:
• Stricter sponsorship and accreditation requirements for education providers;
• A certificate of English-language ability at B2 or above from an independent test provider;
41 CCH British tax guide, Wolters Kluwer (UK) Limited; cch.co.uk 42 According to the HMRC website, Tax Information Exchange Agreements are “bilateral agreements under which territories agree to cooperate in tax matters through the exchange of information”. 43 Ev 69
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• A maximum of three years study below degree level and five years at National Qualifications Framework 6-7 (undergraduate and postgraduate level) with exceptions for those at the higher level doing a PhD, as well as for those courses which require as a matter of professional qualification a longer duration than five years (e.g. medicine, architecture); and
• Students studying with private education providers will be unable to work whilst studying. Students at publicly-funded educational providers will be able to work 20 hours a week if they are at University or 10 hours a week if they are at college.44
The Government acknowledges that these changes will reduce the number of international students studying at UK institutions, but believes that 80% of the places that are not taken up by international students will instead be taken up by UK or EU citizens.45
34. In July 2011, Brazilian President Dilma Rousseff announced the “Science without Frontiers” programme which plans to introduce 75,000 new government-funded university scholarships for Brazilian students to study abroad by 2014.46 During our visit to Brazil, concerns were raised by some of our interlocutors that the proposed changes to UK student visa applications would make it significantly more difficult for Brazilian students to capitalise on President Rousseff’s initiative by studying in the UK. We understand that the Brazilian government itself is concerned about the possible impact of the new UK application process for student visas.
35. Giving evidence to the Home Affairs Committee on 3 March 2011, Jeremy Browne said that changes to the student visa regulations were not a major concern to overseas governments:
[student visas] get raised in the course of conversations. I have to say it was raised more frequently when I first became a Minister in the first month of the Government than it does now [...] I cannot remember it being raised specifically in the last month or two in a general conversation.47
36. Despite these assurances, the Business, Innovation and Skills Committee, in its current inquiry into student visas, have received evidence that the changes have caused considerable reputational damage to the UK in China. Witnesses reported concerns from UK universities and businesses in China about the negative impact of the visa regime and proposed immigration cap on the UK economy.48
37. In a letter of 15 August the Government told us that the UK has been approached by the Brazilian government as a preferred destination for Brazilian students studying abroad as part of the “Science without Frontiers” programme and that the British Embassy in
44 HC Deb, 22 March 2011, cols 855–58 45 “Reform of the Points Based Student (PBS) Immigration System: Impact Assessment”, UK Border Agency, 1 June 2011, page 19 46 See: “In Brazil, a plan to send students to world’s top colleges”, Time Magazine, 21 September 2011. 47 Jeremy Browne MP, Oral Evidence to Home Affairs Committee, 3 March 2011, HC 773, Q 368 48 Business , Innovation and Skills Committee, Eighth Report of Session 2010–12, Trade and Investment: China, HC 1421, paragraph 65
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Brasília has held discussions with the Brazilian Ministries for Education and Foreign Affairs on “how such a scheme might work within existing UK migration constraints”. Discussions are ongoing and are centred around “selected Brazilian students spending a period of less than twelve months at a UK institution as part of a wider course of study.” In addition to these discussions, the Embassy and British Council have highlighted this programme as an opportunity for the UK education and private sectors. The Deputy Prime Minister’s visit in June 2011 saw a commitment to “set-up a UK-Brazil implementation group to take forward higher-education co-operation”.49
38. BG Group, which has a large commercial presence in Brazil, has announced that it will fund the UK costs of the first tranche of Brazilian science and technology students to spend one year of their studies at a UK university. This is expected to cover “up to 450 scholarships over the next 4 year period”.50
39. We conclude that the Government’s proposed changes to student visa entry requirements may make it more difficult for Brazilian students to study in the UK, at the very time when the Brazilian government is proposing to increase the number of Brazilians studying aboard. We recommend that the FCO explore with the Home Office what steps can be taken to ensure that the new visa regime does not prevent suitably qualified bona fide Brazilian students from entering the UK to study. We further recommend that, in its response to this Report, the FCO inform us of the outcome of these discussions.
Rio+20 Conference 40. The Rio+20 Conference on Sustainable Development, the so-called “Earth Summit 2012”, aims to build on the United Nations Conference on Environment and Development (UNCED) which was held in Rio de Janeiro in 1992. The summit will be a chance for participants to take stock of developments in the 20 years since the last Rio Conference on sustainable development. It will also allow greater efforts to be made on the reduction of carbon dioxide emissions. Given the importance that the Brazilian populace places on the environment and the concept of sustainable development (see paragraphs 117–118 below), the Brazilian government is keen to achieve a positive, substantial success at this summit, particularly as Rio de Janeiro will again be hosting the conference. Informal conversations during our recent visit confirmed to us the importance that the Brazilian authorities are placing on this conference and their hope that other states will actively engage in the conference and work towards a substantive conclusion. Our colleagues on the Environmental Audit Committee have recently launched an inquiry into the UK’s preparations for the Rio+20 Conference.
41. The Government’s position ahead of the Rio+20 Conference is “still being developed”, with Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs, leading the UK’s preparations. A decision on which other Minister will attend the conference with Mrs Spelman has yet to be made.51
49 Ev 70 50 Ev 70 51 Ev 70
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42. Given the importance that Brazil is placing on a successful outcome to the forthcoming Rio+20 Conference, we conclude that the conference represents a golden opportunity for the UK to show its commitment to a stronger bilateral relationship. We recommend that British Ministers, diplomats and officials should liaise closely with their Brazilian counterparts during the run-up to Rio+20, not only to maximise the chances of a successful outcome to the conference but, as an ancillary benefit, further to enhance UK-Brazil relations. We welcome the work of our colleagues on the Environmental Audit Committee in this area.
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3 Brazil as a global power
43. Between 1964 and 1985, Brazil was a military dictatorship. As was frequently the case with such regimes in South America, the dictatorship was aligned with the United States, although the Brazilian-US relationship was not as close as that between the USA and other South American countries. The military dictatorship acquiesced in a peaceful transition to democracy in 1985.
44. Democratic Brazil’s foreign policy over the last 15 years has been shaped by three key figures: President Cardoso (1995–2003), President Lula (2003–11) and his Foreign Minister Celso Amorin (2003–11). Under Presidents Cardoso and Lula, Brazil broadly adopted Western “norms” and values in respect of parliamentary democracy and human rights. Brazil is a party to all major humanitarian law and human rights treaties, without any reservations.52 It is also an active participant in the “Doha round” of trade negotiations and international organisations such as the UN and IMF.
45. The UK’s increased emphasis on relations with Brazil comes after a period of an “activist” Brazilian foreign policy. Under President Lula, Brazil took a more affirmative line on foreign policy. Professor Hurrell described this to us as an “activist, personalist, voluntarist and ambitious foreign policy”.53 Lula’s official aim, in the words of his Foreign Minister Celso Amorin, was to “increase, if only by a margin, the degree of multipolarity in the world” while at the same time achieving “recognition” as a valid global policy power.54 To achieve this, Brazil pursued a “South-South” policy and sought to become the voice of the “global South” or the so-called G77 of poorer countries.55 Under Lula, Brazil opened 33 new embassies, 5 new permanent missions to international organizations (including the International Atomic Energy Agency and the Human Rights Council) and 19 new consulates. Most of the new embassies were to African countries. Brazil currently has more embassies in Africa than the UK.
46. According to the FCO, Brazil is seeking to increase the amount of global multipolarity out of a desire for global institutions better to reflect the global balance of power:
Brazil’s approach to foreign policy is driven by support for multilateralism, a rules- based international system and respect for other countries’ sovereignty. Brazil considers the current multilateral system designed in the developed world’s image and not reflecting the reality of the 21st century. The rise of the G20 has boosted their hopes of reshaping such global institutions. Brazil wants the G20 to be the pre- eminent forum for economic matters beyond the global crisis.
52 http://www.adh-geneva.ch/RULAC/index.php (Geneva Academy of International Humanitarian Law and Human Rights) 53 Q 95 54 Andrew Hurrell, “What kind of rising state in what kind of institutional order?” Rising States, Rising Institutions, p 9 55 The “G77” was established in 1964 as a caucus of 77 developing countries within the UN. There are currently 131 members of the G77, including some “developed” or “semi-developed” countries, including China, India and Brazil. http://www.g77.org/
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Brazil believes it has the right to a place at the senior table, including a permanent seat at the UN Security Council (it is now in the second year of a non-permanent seat).56
The FCO is broadly supportive of Brazil’s rise as a global power, viewing Brazil as a valuable partner diplomatically and one which shares the UK’s core values and aims. Jeremy Browne told us that:
Brazil is quite a good voice internationally in terms of our values. Rather than having the familiar cast list of European countries and North Americans making those points, there is the opportunity for a new voice to make points that we would support.57
Reform of the United Nations Security Council 47. Brazil is currently one of ten non-permanent Members of the UN Security Council. These countries, unlike the five permanent members (China, France, Russia, UK and US— the “P5”), do not possess a right of veto. Brazil’s two-year term of office is due to expire at the end of 2011. According to many commentators, Brazil’s over-riding diplomatic aim is reform of the Security Council, in order to increase its “legitimacy”. This reform would include a permanent UN Security Council seat for Brazil which would act as the voice of the “global South”. The Brazilian Embassy told us that:
Consistent and continuous participation of developing countries as permanent members is vital in order to award legitimacy and efficacy to the Security Council. […] There is an almost unanimous view among Member States that the Security Council must be enlarged in order to both better reflect present political realities and to make the organization more representative, legitimate, efficient and effective.58
Neil Atkinson told us that reform of the UN Security Council was “the ultimate goal of Brazilian diplomatic policy”.59
48. The British Government supports Brazil’s application for permanent membership, as part of a wider reform of the Security Council.60 Jeremy Browne told us that the UK’s commitment to reform is long-standing and that it would prefer to expand the permanent representation to 10, to include Germany, Japan, India and Brazil, together with a major African power. He suggested that such an arrangement may require “two-tier” memberships where some permanent members lack the right of veto currently enjoyed by the P5.61
49. An argument sometimes advanced against a permanent Brazilian presence on the Security Council is that Brazil has not shown itself willing to accept the responsibilities
56 Ev 46, paras 22–23 57 Q 125 58 Ev 50, para 29 59 Q 17 60 Ev 46, para 23 61 Q 131
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attendant upon being a global power: in particular, the duty to play a leadership role in tackling international disputes, and assertively to defend and promote human rights globally. Figures such as Jorge Castaneda, former Mexican Foreign Minister, have stated that Brazil (and fellow “BRICs”, Russia, India and China):
remain attached to the rallying cries of their independence or national liberation struggles: sovereignty, self-determination, non-intervention, autonomous economic development. And today, these notions often contradict the values enshrined in the international order.62
Professor Hurrell told us that this view of Brazil—as a country “unready” to act globally— was particularly prevalent in the US:
I was in New York all last year and heard lots of language accusing Brazil, such as, “Brazil is an adolescent, it hasn’t really learned to grow up, it’s got power but it doesn’t know how to use it”.63
50. We asked our witnesses their opinion on Brazil’s readiness to act as a global power or whether the UK’s open support of Brazil’s claims to a permanent UN Security Council seat was premature. Dr Riethof said that the reality of Brazil’s “non-interventionism” was more nuanced than that articulated by Mr Castaneda and that Brazil does not eschew intervention as a concept. She noted that while Brazil traditionally opposed military interventions, it did support non-military intervention on humanitarian grounds, and that, especially within Latin America, it was heavily involved in conflict mediation. She speculated that Brazil hoped to become a recognised “neutral” global power and play a mediator role at the global levels.64 Dr Riethof acknowledged that “Brazil is involved in conflict mediation through the regional structure of the Union of South American Nations”, but added that “I am not entirely sure whether that translates into a recognition of the responsibilities in the Security Council”.65
51. Professor Hurrell told us that while “Brazil is towards the sovereignty end of the spectrum, [...] there has been quite a lot of movement towards ideas not of non- intervention but of non-indifference about what happens, so there has been movement there”. He also suggested that domestic pressures were forcing a rethink on Brazil’s traditional, “non-interventionist” foreign policy and its place in a reformed global order which included Brazil as an acknowledged “power”:
There is a big debate, though, about what the responsibility of a permanent member actually involves. It clearly involves activities in peace and security. [...]
The role of a broader membership could well be in providing other assets of this mediation kind and other important assets in terms of representation. So I think the Brazilian view would be to press a broader debate about what “the responsibilities” of permanent membership are. [...]
62 Jorge G. Castaneda, “Not Ready for Prime Time”, Foreign Affairs, September/October 2010, pp 112–113 63 Q 97 64 Q 104–106 65 Q 106
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Is there broad support? Yes, there is much more interest in foreign policy domestically. There is much more support for an active foreign policy. There is much more contestation about things like Brazil’s Iranian policy.66
He also stressed that this internal debate was not yet complete and that Brazil’s traditional doctrine of non-intervention still held sway.67
52. The FCO believes that Brazil is slowly moving towards a less “hands off” stance in its international relations:
President Rousseff has changed Brazilian policy on human rights, as evidenced by the Brazilian vote in favour of a Special Rapporteur on Human Rights for Iran in March 2011.68
53. Brazil’s leadership of the UN peacekeeping operation to Haiti (MINSUTAH) has been interpreted by some as a sign that it is more ready to accept a global “leadership” role. Brazil currently contributes around 2,200 troops to UN missions, chiefly to Haiti. In addition, Brazil contributes to the UN naval mission off the coast of Lebanon.
Brazil’s positions on Iran and Libya 54. Brazil’s recent foreign policy actions with regards to Iran and Libya provided us with a useful case study of the country’s role as an international actor.
55. President Lula was widely criticised for the closeness of his links with President Ahmadinejad of Iran. Towards the end of Lula’s second term as President, Brazil and Turkey attempted to intervene in the ongoing negotiations between Iran and the so-called E3+3 group of countries (the US, Russia, China, UK, France and Germany) over Iran’s nuclear programme. After refusing to support US-led calls for tighter sanctions against Iran, in May 2010 Lula announced that Brazil had persuaded Iran to send its uranium abroad for enrichment (echoing an earlier suggestion put forward by the US). The initiative was dismissed by the US government. Media commentators roundly criticised Lula’s efforts. Newsweek noted that this was part of what they saw as a worrying trend in Lula’s foreign policy:
Rather than using Brazil’s prominence to press outlier regions to respect human rights and comply with international rules on nuclear power, Lula suddenly seems bent on ducking controversy and accommodating demagogues. He routinely trades bear hugs with Hugo Chavez [and] Brasília’s diplomats abstained on a vote “deploring the grave, widespread and systemic human-rights abuses” in North Korea.69
66 Q 107 67 Q 107 68 Ev 46, para 25 69 Mac Margolis, “Rogue Diplomacy”, Newsweek, 7 May 2010
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56. Lula was further criticised for defending Ahmadinejad’s “democratic” victory in the disputed 2009 Presidential election, and speaking out for Iran’s right to enrich uranium for nuclear energy and downplaying warnings that Iran is developing nuclear weapons.70
57. Brazil’s foreign policy doctrine, which is based around the concept of “national sovereignty”, was further tested during the recent UN votes on UN Security Council Resolutions 1970 and 1973, both of which called for action against Libya. Brazil abstained on the votes on both Resolutions. Speaking following the adoption of UNSCR 1973, Brazil’s representative to the UN said that:
Brazil’s abstention should not be interpreted as an endorsement of the ruling regime in Libya, but the text of the resolution before us contemplates measures that go much beyond [the prevention of violence] call. We are not convinced that the use of force as contemplated in the present resolution will lead to the realisation of our most important objective—the immediate end of violence and the protection of civilians”71
58. This position has been interpreted by some commentators as a sign that Brazil remains unready to act as a responsible global power. According to the Financial Times it is an indication that “an expanded council would strengthen the hand of the non- interventionists and weaken that of the West”.72
59. We asked Professor Hurrell and Dr Riethof how Brazil’s actions on Iran and Libya should be interpreted. Professor Hurrell told us that Brazil’s attempted initiative on the Iran nuclear programme fitted Brazil’s foreign policy narrative and its belief that the country has an important, “alternative” role to play in global affairs:
Even in some of the, what you term, “controversial” policies—the idea that Brazil [...] has a role in helping to manage and mitigate some of the more obvious deep-rooted regional problems that everyone recognises and some of the problems that others, particularly the US, recognise, say in relation to Cuba and Venezuela—its policy is clearly seen as part of a narrative about what Brazil can do. That is not about the great, grand provisions of some new global order, but important provisions of active diplomacy and responsibility in its region.73
Professor Hurrell also noted that Lula’s engagement with the Iranian regime was not unanimously supported in his own country and should not automatically lead to conclusions about Brazil’s wider foreign policy:
Interestingly, of course, Lula’s policy generated this enormous debate and controversy inside Brazil about whether it was a good thing or a bad thing—relations with Washington, human rights, and all of that.74
70 See: “Lula defends Ahmadinejad’s Nuclear Goal, Plans Visit to Iran”, Bloomberg, 23 September 2011, and “Ahmadinejad in Brazil: Why Lula defies the US”, Time Magazine, 25 November 2011. 71 Maria Luisa Viotti, Speech following adoption of UN Resolution 1973, http://www.brasil.gov.br/news/history/2011/03/18/adoption-of-united-nations-security-council-resolution-1973-on- libya/newsitem_view?set_language=en 72 “BRIC abstentions point to bigger UN battle”, Financial Times, 18 March 2011 73 Q 100 74 Q 103
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60. Dr Riethof suggested that Brazil’s position on Libya stems from “Brazil’s traditional rejection of intervention along the lines that were proposed in the resolution”.75 Dr Riethof agreed with Professor Hurrell that many of Brazil’s recent foreign policy actions stemmed from a desire to be seen as an “alternative” global power.
61. Notwithstanding the various criticisms which have been made of Brazil’s foreign policy stance, Jeremy Browne told us that he remained confident that Brazil’s values were similar to those of the UK, and that Brazil had abstained in the vote on UNSCR 1973, not because of deep-rooted antipathy towards military intervention, but because “Brazil [was] not fully persuaded. If it was, it would not have abstained.”76 Mr Browne went on to say that “there are a handful of countries in Latin America that we really struggle to see eye to eye with on these matters. Brazil is definitely not one of those.”77 He further speculated that Brazil’s, to some Western eyes, ‘difficult’ positions on global matters could be attributed to the fact that it was still in a state of transition towards a fully evolved foreign policy which took account of its increased stature in the world:
the [South American] continent as a whole, inasmuch as one can generalise, has moved massively in the right direction, as we would see it, over an accelerated period of time. Different countries are at different steps in the process of how they respond to those movements, consolidate them and analyse them.78
62. Mr Browne agreed with Professor Hurrell and Dr Riethof that Brazil was currently engaged in an internal debate over its role as a global power:
there is a debate to be had [...] which was that there are times when you do need to intervene to safeguard or advance our values. There are other countries that are not completely hostile to that idea, but would prefer somehow to try to reconcile those two, even when it is a struggle to do so. From observing, Brazil is in that position.79
Mr Lapsley noted that while “many Latin American countries are uncomfortable with hard-edged intervention”, there was a role for Brazil in promoting its “soft power” and acting as an exemplar to others:
One of the things that we have been talking to Brazil about is the way that it, as a model for economic and political transition, in common with many other Latin American countries, has an awful lot to offer the Arab world as it goes through its own political and economic transition. Perhaps it is in that kind of way that those countries can most helpfully get involved.80
63. Mr Browne further stated his support for Brazil as a global actor and expressed his approval of recent changes in Brazil’s foreign policy under President Rousseff:
75 Q 104 76 Q 144 77 Q 144 78 Q 144 79 Q 145 80 Q 147
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I do not want us to feel that it is only countries like the United Kingdom, France and the United States that are allowed to have a global view and that somehow the Brazilians should not be thinking beyond their own continent. It is entirely legitimate for them to have that wider role, but it is how they choose to exercise that wider role. My view is that the choice they took a few years ago was not wise. Voting on the Special Rapporteur on Human Rights was the right way to go and the best decision that they could have made. I hope that that is indicative of Brazil using its global role in ways that are more compatible with our objectives in the future.
These comments by Mr Browne echoed the proposal by Dr Riethof that the UK should openly welcome Brazil’s rise. She told us that the UK should:
recognise Brazil’s various foreign policy roles and various formats and regions and to use that also to support a Brazilian role at a global level, even if that does not immediately translate into a permanent seat at the Security Council. As you probably know, US support for Brazil as a permanent member has not been expressed openly, and China is apparently also not necessarily supporting a Brazilian bid, so some support may be useful for a Brazilian campaign in that direction.81
64. We conclude that the UK’s explicit support for Brazil’s permanent membership of the UN Security Council, as part of wider UN reform, is to be welcomed. We believe that Brazil has a potentially valuable role to play on the global stage, drawing upon the prestige and legitimacy conferred by its rising economy, its commitment to democracy, and its status and experience as a member of the developing “South”. We recommend that the Government should continue to seek to act in close partnership with Brazil at the UN and in other international fora, and should encourage Brazil increasingly to take on the responsibilities associated with being a major global power. In this context we welcome the recent development of Brazilian foreign policy under President Dilma Rousseff, particularly with regards to the promotion of human rights in other countries.
81 Q 107
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4 The Falkland Islands
65. In January 2011, HMS Clyde, a Royal Navy patrol vessel based in the Falkland Islands, was refused permission to dock in Rio de Janeiro. This was the first time that a Royal Navy vessel had been refused such permission. It has been suggested that the refusal was ordered by the Brazilian government to show solidarity with Argentina in order to improve relations between Brazil and its largest neighbour. It was further suggested that this decision by the Brazilian government was linked to an official visit by President Rousseff to her Argentinean counterpart which occurred in the same month as the refusal of the Clyde. Brazil formally supports Argentina’s claims to the Falkland Islands, however, the UK Government argues that the recent signing of a defence agreement between the UK and Brazil is a sign of Brazil’s commitment to a continuing close defence relationship with the UK.82 The FCO states that the Government had “expressed its disappointment” over the HMS Clyde incident and is “discussing with Brazil how to handle these visits in the future”.83
66. Professor Hurrell speculated that Brazil’s increasing emphasis on regional integration had helped shape Brazil’s evolving position on the Falklands which was likely to become increasingly supportive of Argentina’s stance:
It has become a central part of Brazilian foreign policy, so not doing anything that would be dramatically out of step with the region, or that would interfere with its regional policy, seems to be something on which one can bank quite heavily as a major factor that influences what Brazil does and doesn’t do in relation to the Falklands/Malvinas.84
Neither Professor Hurrell nor Dr Riethof thought that the refusal of permission for HMS Clyde to dock represented a fundamental shift in Brazil’s position over the Falklands; instead they both felt that the problem was “political” rather than military.85
67. On 23 June 2011 we wrote to the Foreign Secretary requesting more information on the HMS Clyde incident and what measures had been put in place to ensure that Royal Navy ships were not refused permission to dock in future. The Government’s response, which we received on 4 July, stated that the UK’s position on the Falkland Islands is “clear and longstanding”.86 We were told that Brazil is aware of the UK’s position that “the Falkland Islanders’ right to determine their own political future is paramount” and the UK is “not prepared to discuss the sovereignty of the Falkland Islands against the wishes of the Falklands people”. The Government stressed to us that they “are not shy about this issue with Brazil” but preferred to do so in private, away from “the full glare of media and public scrutiny”. Accordingly we were surprised when the Deputy Prime Minister chose to discuss it 'in the full glare of the media' on his recent visit to Brazil.
82 See: “Royal Navy’s Falklands ship turned away by Brazil”, The Daily Telegraph, 10 January 2011. 83 Ev 47, para 32 84 Q 117 85 Q 116–17 86 Ev 68
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68. In a separate letter sent in July, the Foreign Secretary gave us more information about the original incident. He stated that HMS Clyde planned to make a routine stop in Rio de Janeiro, “but did not get diplomatic clearance to do so”. The Government told us that they are “very disappointed by this development” and aimed to “find a way forward which meets Brazil’s concerns whilst preserving, and indeed enhancing, the defence relationship between our two countries”.87 A letter of 2 August confirmed that this issue was raised with the Brazilian Defence Minister, Nelson Jobim, during his visit to the UK on 5–7 July. This letter also suggested that the Brazilian government “understand[s]” the UK’s position.88
69. On 24 August we requested information from the FCO in light of recent news events suggesting that Brazil had adopted a stronger position towards Falklands-flagged ships and, in common with Argentina and in accordance with a UNASUR resolution, was refusing docking rights to ships flying the flags of the Falklands. President Dilma reportedly justified this decision by saying that ships flying the colours of the Falklands were doing so “illegally”.89 In their reply to our request, the FCO stated that:
it is important to note that the November 2010 UNASUR language on Falklands- flagged shipping to which the article refers is caveated with the need to adhere to “international law and respective domestic legislation”. Accordingly, we do not expect Falklands or UK-flagged commercial vessels to be refused entry into South American ports, despite pressure from Argentina.
The FCO reiterated that the UK’s position towards the Falklands “is well-known ... to our partners in South America, including Brazil.”90
70. The turning away of a Royal Naval vessel is a serious matter. We regret that the Brazilian government felt it necessary to take such action. While we accept the UK Government’s position that they would prefer to discuss such matters in private and “away from the full glare of media and public scrutiny”, we note with disappointment their reticence on this matter in correspondence with us.
71. While we are confident that the FCO has in place procedures to prevent a recurrence of this unfortunate development, we have yet to be told precisely why diplomatic clearance was refused for HMS Clyde, however we note that the scheduled arrival of the Clyde clashed with a meeting between the Brazil and Argentinean Presidents. We recommend that, in response to this Report the FCO tell us exactly why clearance was refused and what procedures are now in place, including a guarantee that in future such applications are overseen by a diplomat of an appropriate level of seniority in order to mitigate against such failings in future.
87 Ev 69 88 Letter from the Foreign Secretary to Richard Ottaway MP, Chair, Foreign Affairs Committee, dated 2 August 2011 (BRZ 15) [not printed] 89 “Brazil blockade hits Falklands oil hopes”, The Sunday Times, 21 August 2011 90 Ev 71
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5 Commercial relations between the UK and Brazil
72. The FCO envisages the proposed stronger bilateral relationship with Brazil as incorporating a much closer trading relationship. In his November 2010 Canning Lecture, the Foreign Secretary referred to Latin America as a growing economic powerhouse. Jeremy Browne noted that Brazil is the “seventh largest economy in the world, and it will shortly be the fifth largest”. He suggested that this economic growth would encourage a greater degree of bilateral trade: “in economic terms [...] Brazil is getting into territory where what the British economy offers, in terms of services or hi-tech manufacturing, is very compatible with the next phase of Brazilian economic development”.91 The FCO’s written submission states that “a growing [Brazilian] middle class provides a potential market for goods and services the UK can offer. Brazil weathered the global economic crisis better than Europe and North America”.92 Nicholas Armour of UKTI commented that:
Brazil is a developed nation. It has huge middle-class and consumer purchasing power that is probably larger than in the United Kingdom. We jolly well ought to be selling into that, at least at the levels that we export to the rest of the world.93
Given these advantages, the FCO aims to double annual UK exports [to Brazil] from £2 billion to £4 billion by 2015, that is, increase it to a level roughly equivalent to the UK’s current trade with Sweden or Switzerland.94
73. Mr Armour told us that the UK’s competitors were already active in the market and that the UK’s renewed interest in Brazil was somewhat overdue:
If our normal global trading rivals are doing successful business there, we should be doing so, too [....] We are saying not that you must go here because it will last, but here is something that your competitors are taking advantage of and perhaps you ought to be too, particularly as markets elsewhere are somewhat flat.95
74. Despite the UK’s relatively late acknowledgement of the opportunity Brazil brings, there are some signs that progress towards the FCO’s aims is being made. UKTI has told us that over the past three years, inquiries from UK companies have increased by 500%, while exports to Brazil in 2010 saw an increase of 23% over the previous year.96
75. To help achieve the overall objective of doubling UK exports (an objective the Government has also set for trade with India, Kuwait, Qatar, South Africa and Turkey), a variety of measures have been introduced, including the establishment of a UK-Brazil Joint
91 Q 125 92 Ev 45, para 12 93 Q 67 94 UK export and import in 2009, HM Revenue and Customs 95 Q 77 96 Ev 45, para 14
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Economic and Trade Committee (JETCO) and a UK-Brazil CEO [Chief Executive Officer] Forum, an increased number of Ministerial visits, and greater diplomatic and UKTI representation in-country (for which, see paragraph 19 above).
JETCO and the CEO Forum 76. Formed in 2006, the JETCO was set up “to promote and develop trade, to address barriers to trade and to create a better business climate”. It was the first formal mechanism set up to remove barriers to trade between the UK and Brazil.97 In 2007, the House of Commons Trade and Industry Committee welcomed the creation of the JETCO but noted “that its success will depend on maintaining both political and business interest and involvement in both countries”.98 The JETCO has generally been viewed as a success. In November 2008, the then Secretary of State for Business, Enterprise and Regulatory Reform, Rt Hon John Hutton MP, said that as a result of the JETCO, “senior representatives from public sectors, business people from major UK and Brazilian companies and leading business bodies have been sharing learning and experience to create a better environment for our two countries to do business together.”99
77. Nicholas Armour highlighted the value of the JETCO as a regular forum for discussing barriers to trade:
we have regular opportunities to speak to the Brazilians, whether in the course of normal business through the ambassadors or on business with Ministers or JETCO. We may say, “You do realise that this particular issue is counter to your undertakings with WTO or whatever it is. You do realise that you are holding up British interests in doing business in your country; you say you want it”—and this, that and the other100
78. In August 2010 the new Government announced the creation of the Brazil-UK CEO Forum. This will bring together business representatives of “priority sectors” to discuss “practical advice on the issues and opportunities to be addressed as part of an enhanced bilateral partnership”. When asked about the Brazil-UK CEO Forum, Mr Lapsley said that the forum is an opportunity for business leaders to discuss ways in which the barriers to trade could be reduced.101
UK commercial presence in Brazil 79. Of the UK Posts in Brazil, the consulate in São Paulo is particularly focused on commercial matters; although there are also small commercial offices in Recife and Porto Alegre (the post in Recife will be “upgraded” to a Consulate-General).102 There are plans to
97 http://www.ukti.gov.uk/export/countries/americas/southamerica/brazil/item/108425.html 98 Trade and Industry Committee, Seventh Report of Session 2006–07, Trade with Brazil and Mercosur, HC 208, para 87 99 John Hutton Speech to Brazilian Chambers of Commerce, 28 November 2008, Dorchester Hotel http://brazilianchamber.org.uk/sites/default/files/publications/brazilbusinessbrief08.pdf 100 Q 84 101 Q 161 102 Ev 45, para 7 and HC Deb, 11 May 2011, cols 1166–67
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increase the UK’s commercial presence in Brazil. Angus Lapsley told us that UKTI is “looking at” its allocation of resources to its presence in Brazilian operations.103 Nicholas Armour was confident that the UKTI staff based in Brazil were fully integrated into the FCO network and “almost all of them” spoke fluent Portuguese. Most of UKTI’s staff in Brazil are locally engaged Brazilians; those at senior director level, while British, are often married to Brazilians.104
80. UKTI highlighted a changed approach to their work in Brazil. Mr Armour called this a “project-focused approach”. Mr Armour complained that too often British exporters and UKTI had relied on a laissez-faire approach and had not pooled their resources in a structured manner. The aim of the new approach was to be:
a little more organised, particularly in the way that companies call on our services in- country [...] We are trying to give that sort of steer to companies looking to win business so that it becomes more coherent.
81. Mr Armour told us that “the Brazilians tell us that they would much prefer that approach, rather than a whole host of people all trying to call on a few key officials in an unstructured way”. This type of work has already begun on direct knowledge transfer around the Olympics with “clusters” of firms currently supplying the 2012 Olympics being brought together by UKTI.
82. CityUK are generally supportive of the work and performance of the UKTI operation in Brazil:
there are good links between the CityUK (and its practitioners) and the UKTI teams in Brazil and London. There are regular visits, exchanges of views, and two-way contacts to see how best UKTI can support UK companies in the sector. [...] The Posts in Brazil understand the importance of the financial and related services sector as a facilitator of business across other sectors. We acknowledge the significant expansion in UKTI activities both in market and in the UK in recent years to advise UK companies of the opportunities in Brazil, as demonstrated by the increased number of companies visiting the country.105
83. Since the General Election, the Business Secretary (Rt Hon Vince Cable MP), the Minister of State at the FCO (Jeremy Browne MP), the Prime Minister’s Special Adviser on Trade (Rt Hon Lord Brittan), and the Lord Mayor of London (Rt Hon Alderman Michael Bear), have all visited Brazil. In June 2011, a delegation comprising the Deputy Prime Minister (Rt Hon Nick Clegg MP), the Culture Secretary (Rt Hon Jeremy Hunt MP), the Universities Minister (Rt Hon David Willetts MP) and the Trade and Investment Minister (Lord Green of Hurstpierpoint) visited Brazil accompanied by the heads of 20 leading British firms.
103 Q 161 104 Q 73–74 105 Ev 63, para 6
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84. Nicholas Armour said that these visits were a sign of the UK’s efforts to promote a commercial relationship and, unlike previous efforts, the Government was determined to maintain this programme:
traditionally Latin America has been under-visited by significant Britons. If you will allow me a slight moment of cynicism, normally a Prime Minister will go and declare Latin America to be discovered and then that is the last time they can go. That happens for very understandable reasons—it is quite a long way away. The fact that we have had a fairly sustained programme of ministerial and high-level visits ... shows that there is a growing commitment.106
85. The FCO fund some of UKTI’s work in Brazil via the Commercial Diplomacy Fund.107
Barriers to trade 86. According to the FCO’s Director, Americas, Angus Lapsley, British firms need to have an established presence in Brazil and be prepared to plan for the long-term:
The British companies that do well in Brazil—HSBC, BG [British Gas group] and so on—have been at it for a long time, and have built up relationships. It is not like America where you can pitch up with a good idea and do business. You really have to work the Brazilian system.”108
Informal conversations that we held with businessmen in Brazil confirmed this opinion.
87. The Brazilian business culture is very different from that of the UK. It is sometimes argued that Brazil is a difficult country to do business in. According to data collected by the World Bank, Brazil is ranked 127 out of 183 economies for the “Ease of doing business”.109 We have heard anecdotally that there are 5,000 accountancy regulations in Brazil and that their application is somewhat random. The Economist recently cited labour laws which prohibit redundancies “without due cause” and noted that alcoholism and repeated absence did not constitute “just cause”.110 In addition, corruption is a continuing problem. According to Transparency International, Brazil is the 69th most corrupt country in the world (equally placed with Montenegro and Romania). The Economist has noted a series of political scandals involving bribery and “cash for votes”. On 7 July, a Minister in the Department of Transport resigned after allegations of corruption in the award of contracts.111 According to Nicholas Armour, corruption is a serious and “difficult” issue.112 Angus Lapsley said that:
106 Q 67 107 Q 88 108 Q 161 109 International Finance Corporation and the World Bank, Doing Business in Brazil, http://www.doingbusiness.org/data/exploreeconomies/brazil/ 110 “Brazil’s labour laws: Employer, beware”, The Economist, 11 March 2011 111 “Corruption in Brazil: The Money Trail”, The Economist, 25 February 2010; “Brazil’s Transport Minister quits in corruption scandal”, BBC News, 7 July 2011 112 Q 93
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Going back to what the Minister said earlier about Brazil scoring badly as a place to do business, a lot of that is to do with the fact that it’s a place where it takes time to build relationships, to get round the bureaucracy, and to work out the best way of working through local culture. I think we will work on that over a long period to get results.113
88. During our recent visit we were told that, in addition to the structural problems of bureaucracy and corruption, Brazilian companies were increasingly nationalistic and Portuguese-speaking, especially at higher levels. One interlocutor told us bluntly that British firms needed to speak Portuguese (or hire Portuguese-speaking staff) to be successful. We were also told that the standard of English-language teaching in Brazilian state schools was exceedingly low.
89. We conclude that the Government is right to point to the rich opportunities available for British companies willing to develop their trading links with Brazil. The Government target of doubling trade over the next five years is clearly an arbitrary one, as evidenced by the fact that the same target has been picked for increasing UK trade with five other major countries. It is, in effect, simply an indication of intent to use the influence of government to maximise trade opportunities for British companies over this period. We welcome the steps taken by both the previous and the present Government to encourage trade, including the setting up of JETCO and the Brazil-UK CEO Forum. We hope the JETCO will prove a useful forum by which best practice on reducing corruption may be shared with Brazilian businesses.
90. We recommend that the Government, via UKTI, continue to invest in providing advice to prospective exporters to Brazil, concerning how best to penetrate the Brazilian market, recognising in particular the need for companies to maintain a strong local presence, to retain adequate numbers of Portuguese-speaking staff, and to have the expertise on hand to navigate Brazilian bureaucracy and commercial law.
EU-Mercosur Free Trade Agreement 91. Negotiations began on a free trade agreement (FTA) between the EU and Mercosur (the free trade zone comprising Brazil, Argentina, Uruguay and Paraguay) in 1999. Talks were suspended in 2004 and restarted in June 2010. The importance of this agreement was highlighted by Philip Brown of the Department for Business, Innovation and Skills (BIS), who commented that:
no major developed country, including the US, has an ambitious trade agreement with the Mercosur area. So, this is one of the few times where this will give the EU truly preferential access to what is quite a closed market. If we can get this one moving, we can get a head start on others there.114
92. Mr Brown gave us an update on negotiations. He told us that they are not “moving forward that quickly” and that the target deadline for completion was almost certain to be missed:
113 Q 161 114 Q 72
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the European Commission had an aspiration on concluding the Round this year, which will simply not happen. Realistically, the end of next year will see a good outcome in concluding the round. Once we have a deal that is concluded, we then typically have about another 18 months before the various procedures are gone through and come into force. On that basis, I guess that we would be looking at 2014 as a realistic deadline.115
93. We asked Mr Brown to summarise the benefits of the FTA to the UK economy and why the negotiations had been delayed. He told us that the negotiations were centred on a trade-off between the EU’s protectionist agricultural sector and Mercosur’s protectionist industrial sector. He suggested that protectionism for the industrial sector was particularly prevalent in Brazil.116 Nicholas Armour told us that:
Part of the reason why I think it has been quite difficult to get the FTA sorted out is that they are very worried about what happens if China is able to flood the Brazilian market with their cheaper industrial goods and so on.117
94. From a UK perspective it is anticipated that the “process” side of the agricultural sector, pharmaceuticals and the service sector would benefit most from the agreement.118 Mr Brown stressed that the UK was keen on the agreement being completed:
Our starting point for free trade agreements as the UK is that we generally have an approach to open markets and we see the benefits of both exports and imports. I guess that that is the fundamental starting point. Our overall view of what we want to achieve from our side would be, quite simply, maximum liberalisation possible as quickly as possible.119
95. We conclude that the potential inherent in a free trade agreement between the EU and Mercosur is immense. While we acknowledge the difficulties which exist in the negotiations, we urge the FCO to continue to work towards securing an agreement which will give EU firms a large advantage in a huge market. We recommend that, in its response to this Report, the FCO provide us with an update on negotiations.
The energy sector 96. A particular area of commercial interest for British firms is in Brazil’s rapidly growing oil and gas sectors. Recent discoveries by the semi-private Brazilian firm Petrobras in the so-called “sub-salt”120 fields have led to speculation that Brazil now holds the sixth largest oil and gas reserves in the world. The extraction of oil from the sub-salt fields will be a massive technical challenge. Gisele Araujo of Nabas Legal International drew our attention to the:
115 Q 72 116 Q 68 117 Q 82 118 Q 70ff 119 Q 76 120 The “sub-salt” fields are found under the ocean floor, underneath a thick (approx. 2 kilometres) layer of salt.
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huge risks arising from pressure and temperature conditions never before experienced, corrosion of equipment, can pose a true technological and scientific challenge and a high hazard to workers or even tragedies like the leak in the Gulf of Mexico. Finding oil in entirely new conditions, overcoming the thick layer of salt, requires the development of new technologies for extraction.121
97. In addition to the technical challenges, concerns have been raised over the Brazilian government’s economic policies in relation to the extraction of oil from the fields. Petrobras have been designated the sole operator in the field and must make up 30% of any consortium, and most goods and services needed for the extraction must be sourced within Brazil.
98. We asked our witnesses about these developments and their implications for UK investment. Paul Domjan told us that the recent decisions by the Brazilian government made sense and were not an impediment to UK investment:
Brazil has recently changed its regulatory environment to make Petrobras the designated operator, which has been greeted with some disdain in the UK. However, there are some good reasons why the Brazilians want to do that. That is not necessarily an impediment to UK investment—it does not prevent it. Petrobras will still need financing and technical support. It will still need to rent vessels, and it will need engineering and a whole range of other services, [...] so there’s still a lot of scope for the UK to play a part in this.122
99. Mr Domjan went on to say that opportunities for UK firms existed in the manufacture and maintenance of oil-drilling equipment:
The Brazilian market will need to build literally dozens—perhaps as many as 100—of new drill ships, staff those ships with engineers and hire contractors to do all that work. A lot of those contractors will be UK-based, from Aberdeen.123
Mr Atkinson agreed, calling Brazil a “favourable environment and a great opportunity” which UK companies should be “all over like a rash”. Mr Domjan suggested that as well as the manufacture and maintenance of oil-drilling equipment, the City of London would be a key source of finance.124
100. Our witnesses went on to suggest that, if UK companies wished to take advantage of these opportunities, they must enter the Brazilian markets as “co-operators, joint operators, or as technical operators on part of the project”.125 If this is to happen, UK companies need to show their Brazilian counterparts that “they can actually be partners with Brazilian firms, that they can develop Brazilian expertise, train Brazilian engineers, and develop an industry in Brazil that is world class”.126 Mr Domjan stressed that “the
121 Ev 61, para 39 122 Q 8–9 123 Q 8 124 Q 8 125 Q 9 126 Q 10
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degree to which the aims of the Brazilian government are supported will be crucial to success”.127
101. Given the need for UK businesses to enter the Brazilian market as a “partner”, our witnesses identified important roles for the UK Government. Mr Domjan said that:
The real opportunity that I want to focus on—it is important for determining the course that Brazil takes, as well—is for the UK to work with Brazil to encourage it to set up a framework for managing all of its revenue. Such a framework would usually include establishing some sort of sovereign wealth fund and rules for how the revenue will be used—when it can come on to the budget, when it needs to be saved overseas and doing that to prevent foreign currency appreciation. That would benefit the UK directly because some of that money would come here to the City of London.
Mr Domjan expressed concern that “There is a real role for the UKTI that I personally think it does not fully appreciate in promoting the City of London as a source for saving oil revenue”. He went on to say that the FCO had a role in educating UK companies that local content regulations, which require a majority of parts and services required to extract the oil to be sourced from Brazil-based companies, were not necessarily a threat but an opportunity to benefit in a technical boom in Rio de Janeiro, the centre of Brazil’s energy industry:
We can even take that one step further, which is that UK companies—I started my career at one of them—often see local content as an obstacle. They expect HMG, the FCO, BERR [the former Department for Business, Enterprise and Regulatory Reform, now BIS] and UKTI and everybody to be fighting against local content requirements, but local content requirements are a very reasonable thing. [...]
There is a real role for the British Government institutions, particularly for UKTI, BERR and the FCO, to help companies understand that Brazil’s local content requirements are not something to fight against, that opposing them isn’t a core part of UK foreign policy in Brazil—that, in fact, they are an opportunity for UK companies. [...]
It is notable that when Pemex was developing its policy for opening and reorganising the Mexican oil industry last year, it looked to São Paulo and not to Houston or Aberdeen as a source of expertise. UK companies in São Paulo would be participating in that, and that is an opportunity that you—the UK Government as an institution—need to help UK companies to see more clearly.128
102. During our visit to Brazil we were told that two British firms in particular had received, or were about to receive, large contracts for work in Brazil, namely British Gas Group (BG) and Rolls-Royce. As can be seen in paragraph 86, Mr Lapsley of the FCO has already acknowledged the success of BG Group in Brazil which operates in partnership with the semi-private Brazilian oil firm, Petrobras. BG has been present in Brazil since 1994 and has invested $5 billion in the country with plans to invest “a further $30 billion … over
127 Q 11 128 Q 21 [Paul Domjan]
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the next decade”.129 BG Group is the official partner of Petrobras in exploration and production activities in the pre-salt fields. Some estimates place BG's net share of the pre- salt oil at 2.8 billion barrels of oil with expectations to produce at the rate of more than half a million barrels per day.130 BG’s operations in Brazil were cited as a prime cause behind a recent increase in profits for the overall group.131 While we were in Brazil we were told that Rolls-Royce were close to signing major deals to provide parts for the sub-salt fields. On 15 June it was announced that Rolls-Royce had won the contract to supply two offshore vessels worth £15 million to the oil industry.132 Separately, on 20 June Brazil's TAM airlines signed a deal worth £1.3 billion to purchase Rolls-Royce engines for its fleet.133
103. We note that some larger UK firms, notably BG Group and Rolls-Royce, have had some successes in penetrating the growing Brazilian energy market. We congratulate them on this success and hope that this is a precursor to further trade by UK firms. The role of UKTI in promoting the Brazilian energy sector as an opportunity for UK investment will be crucial. We recommend that in its response to this Report the FCO inform us of UKTI’s work in Brazil, with a particular emphasis on the energy sector.
129 Ev 67, para 2 130 “BG Group doubles estimate of Brazil Santos Basin oil reserves”, The Daily Telegraph, 30 June 2011 131 See, “Higher gas prices and Brazil boost BG Group”, The Evening Standard, 27 July 2011. 132 http://www.rolls-royce.com/marine/news/2011/110615_supply_vessel.jsp 133 “Rolls-Royce wins £1.3bn deal with Brazil's TAM airlines”, BBC News, 20 June 2011
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6 Security and criminality
104. Brazil is an increasingly important transit route for drug trafficking into Western Europe. Europol have identified that approximately 250 metric tonnes of cocaine (between 25 and 30% of global cocaine production) enters European markets annually from Latin America. Drugs intended for Europe mainly depart Latin America via Venezuela through the Caribbean or via the eastern coast of Brazil. Brazil is also a growing consumer of cocaine. According to the CIA, it is the second largest consumer of cocaine in the world.134 The rising importance of Brazil as a cocaine “hub” has encouraged the emergence and presence of international organised crime gangs.
105. The UK is supporting Brazilian efforts to tackle the trade in cocaine and other illicit narcotics within Brazil. The Serious Organised Crime Agency (SOCA) has identified Brazil as one of “seven priority countries for the UK’s counter narcotics work in Latin America.”135 The FCO claim that “Interagency operational co-operation between SOCA and its Brazilian counterparts has proved crucial in disrupting cocaine routes”. We asked Mark Bishop, Head of Strategy, Co-ordination and Development at the International Department, SOCA, about his agency’s work in Brazil. Mr Bishop explained that the importance of Brazil as a cocaine transit hub was linked to a problem of geography. While Brazil was not a significant drug producer:
it shares borders with key cocaine-producing countries. The 40 large container ports on its coast have contributed to it becoming a major transit route for cocaine from South America to mainland Europe and Africa [...] There is some evidence of commercial consignments going directly to the UK, but primarily, the key nexus points are from Brazil into Europe and Brazil into West Africa, which in turn relates to indirect supply on to the UK from there.136
106. SOCA has a long-term relationship with the Brazilian authorities. According to Mr Bishop, SOCA has been present (in various guises) in Brazil for “the best part of twenty years”. The agency has two offices in Brazil and 16 employees based in the wider region.137 A large degree of SOCA’s work is capacity-building through the provision of training courses. Efforts are being made to co-ordinate work with other European agencies present in Brazil such as the German Bundeskriminalamt and the Spanish national police.138 Mr Bishop also claimed that the relatively few resources allocated to the SOCA operation in Brazil inhibited some of the work which could be undertaken and forced SOCA to focus its efforts more on specialist training and “specific smaller projects, rather than some of the bigger plans”.139
134 “Central Intelligence Agency World Factbook”, https://www.cia.gov/library/publications/the-world- factbook/fields/2086.html 135 Ev 46, para 27 136 Q 22 137 Q 34, Ev 53 (SOCA Supplementary Evidence) 138 Q 34, Q 44 139 Q 43
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107. Mr Bishop also told us that Brazil was increasingly important as a regional leader on anti-narcotic measures and was a “proxy” for the USA and UK in countries such as Bolivia where American and British agents have been expelled:
Certainly, as the Brazilian internal cocaine problem mounts up or increases, a lot of the Brazilian federal police’s focus has gone towards that. As part of that focus, they realise that they must engage upstream with their partners, which are Bolivia, Colombia, Venezuela—a transit country to a certain extent—and Peru.140
Given that the transit route for drugs exported from Brazil to Europe is via West Africa, SOCA also noted greater efforts from the Brazilian authorities to operate in West Africa, particularly in Portuguese-speaking countries. SOCA is encouraging these efforts:
We are looking to encourage them—through things such as EU projects, SEACOP, Ameripol141 and others that I can go into in more depth—to get much more involved in Africa, primarily through the Portuguese-speaking countries. [...]
There’s an organisation called the Comunidade dos Países de Língua Portuguesa which is the mechanism largely by which Brazil shifts aid, and there’s about $4 billion of it every year to Africa. We think that there is scope for that to be much more involved in issues that really affect Africa, such as drug trafficking. In that CPLP, you have Guinea-Bissau, Equatorial Guinea, which is an observer, Angola, Senegal, which is also an observer, Cape Verde, Mozambique, Brazil and Portugal. They are all key areas for us when it comes to tackling class A drugs.142
108. During our visit, we were made aware of Brazil’s increasingly active regional role in combating the drugs trade. We were told that Brazil is introducing a regional anti-narcotics plan with the aim of co-ordinating national responses in the region.
109. We are pleased to note SOCA’s long-term presence and continuing work in Brazil. We recommend that, given Brazil’s increasing importance as a drug trafficking “hub”, SOCA focus more work and resources in Brazil to prevent the problem escalating further. We conclude that Brazil’s active leadership role in co-ordinating a regional response is a welcome development and is further evidence of Brazil’s increasing capacity to play a leadership role on international issues. We recommend that the FCO should publicly welcome and support this leadership role.
Human rights concerns 110. Despite a generally positive human rights record, many commentators have noted deep-rooted and continuing problems in Brazil’s criminal justice system with respect to human rights and the treatment of children. In April 2011, the US State Department, in its annual review of human rights around the world, described unlawful killings by state police in São Paulo and Rio de Janeiro as being “widespread”. The State Department added that, while prison conditions “ranged from poor to life threatening; some states made
140 Q 30, see also Q 37. 141 American Police Community 142 Q 31–32
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efforts to improve conditions. Abuse by prison guards, poor medical care, and severe overcrowding occurred at many facilities.”143 During our visit we heard that the maintenance of human rights, especially in the criminal justice sector, is incomplete. We heard informally that the use of violence against children by state authorities is prevalent— particularly towards suspected “gang members”—and the sexual exploitation of children is becoming more frequent.
111. Brazil benefits from an active civil society. By some estimates over 220,000 NGOs are operative in the country, and during our visit we held a meeting with some leading representatives of the third sector. We were told informally that two problems hinder the full implementation of a truly effective human rights regime. Many of our interlocutors suggested that the difficulty lay not in Brazil’s willingness to abide by international human rights conventions—the Brazilian Constitution enshrines, in its Articles 4 and 5, recognition of civil and political rights, and, as already noted, Brazil is a signatory to all major international human rights treaties and conventions—but their application and recognition by state authorities. While the senior levels of Brazilian government openly supported and encouraged the promotion of human rights domestically, this enthusiasm was not found at other levels of government and education in the role of human rights, particularly in law enforcement, was lacking. We also heard that the work of many Brazilian NGOs is hindered by a lack of philanthropic culture in Brazilian society. As a result many charities and human rights pressure groups are dependent on state funding. This limits how critical they can be of government policies.
112. We were told that the UK could play a role in correcting some of the gravest human rights abuses through insisting on the implementation of the recommendations it made in 2008 as part of the Universal Peer Review process at the UN Human Rights Council and through the continued raising of human rights issues during bilateral visits. Jeremy Browne told us that during his recent visit he had raised the issue of human rights and had been impressed with the answers he had received:
In terms of the conversations that I had when I was in Brazil, my observations are that there is a general feeling that significant progress has been made, that further progress still needs to be made, that there are groups in society who can feel excluded or unfairly treated, and that there may be a lag in some areas between social attitudes and the law—in other words, something may not be legal, but that does not mean it does not happen, and I am thinking about such areas as domestic violence, for example. However, there seemed to be a high degree of awareness of those subjects, and the resolve to make progress. I felt like I was talking with a group of people—the parliamentarians and Ministers that I met—who shared our views and our approach to such matters.144
113. Following our evidence session, Mr Browne wrote to us to clarify Brazil’s position with regards to specific international conventions, specifically Brazil’s non-acceptance of Article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination and the amendments to Articles 17 (7) and 18 (5) of the Convention
143 US Department of State, 2010 Human Rights Report: Brazil, 8 April 2011 144 Q 139
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against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. The Minister also wrote to us regarding Brazil’s non-signature of the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families, and the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, conventions to which the UK is also a non-signatory. In all cases the Minister confirmed that he had not had specific conversations on these matters with his Brazilian counterparts. Despite Brazil’s position on these specific points, the Minister commented that “Brazil has certainly made some progress in its protection of individual rights” and “Respect for individual rights irrespective of race, colour, descent, or national or ethnic origin is a key theme of our [the UK’s] discussions with Brazil”.145
114. In this letter, the Minister also explained how the FCO is working towards the promotion of human rights in Brazil. The FCO is “funding work in Brazil by the Association for the Prevention of Torture on effective implementation of the Optional Protocol to the Convention against Torture, which Brazil has ratified”146 and the British Embassy in Brasília is encouraging Brazil to accept Article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination. The Minister further noted that “the EU-Brazil Human Rights Dialogue is an important part” of the discussion on human rights and the “latest talks, on 26 May, in Brasília, were wide-ranging and open, with substantial engagement from the Brazilian side”.147
115. The Government provided us with a summary of their assessment of human rights in Brazil. In this summary:
• The Government restated their belief that President Dilma is determined to strengthen human rights as a priority of her leadership and that this can be seen by Brazil’s vote in favour of a Special Rapporteur on Human Rights for Iran in the [UN] Human Rights Council in March 2011.
• The Government stated that “The Brazilian government is open to discussion of human rights issues ... [and] The Brazilian Government itself recognises that there is still progress to be made on a number of challenging domestic human rights issues.”
• The role of the British Embassy in Brasília was set out. The Embassy holds “forms of stakeholder meetings with NGOs on human rights in Brazil, through the EU human rights groups”.148
116. We conclude that a gap remains between some of Brazil’s international commitments to human rights and their implementation. We recommend that the Government take advantage of the planned series of ministerial visits to continue to raise the implementation of human rights with Brazilian ministers. During our visit we heard informally that a lack of philanthropic culture in Brazilian society means that human rights charities and organisations are dependent on funding from the Brazilian government. We therefore recommend that the FCO should consider making a
145 Ev 67 146 Ev 67 147 Ev 67 148 Ev 71
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contribution to the funding of Brazilian human rights NGOs and in its reply to us update us on its work in this regard.
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7 Environmental concerns
117. Brazil, and Latin America, as a whole will be vital in tackling climate change and global warming. The Foreign Secretary has called the region the “lungs and aquifers of our planet”. The area provides “40% of the world’s remaining rainforest, 35% of global reserves of freshwater and 25% of the world’s cultivable land.”149 The environment and deforestation are both important issues in domestic Brazilian politics—between 2002 and 2007 the number of Brazilians ranking the environment as their top concern more than doubled to 85%—and President Rousseff is said to be a “keen champion of pro- environmental, climate-change-mitigating policies”.150
118. Brazil is also an increasingly active country in international environmental protection negotiations. Brazil played a key role in both the recent international climate change conference at Cancun and the conference on biodiversity in Nagoya. David Norman of WWF told us that “Brazil is a positive partner in many areas on the environment. Not only does it have a critical set of environmental assets, but it is putting itself on the line in several international forums in trying to make a difference.”151
119. The FCO was keen to highlight their role in encouraging Brazil’s positive participation in these fora. The FCO’s memorandum stated that “there was exemplary Brazil/UK co- operation at the Nagoya biodiversity and Cancun climate change meetings in 2010”.152 Jeremy Browne noted that “when I spoke to our Climate Change Secretary about the Cancun Summit, I was struck that he said that the closest partnership he had was with the Brazilians”.153 Dr Sandra Charity of the WWF acknowledged that the FCO, and the UK Government at large, “has been and is already playing an important role”.154 Jeremy Browne further noted that the close collaboration between the UK and Brazil was a precursor to a closer relationship on many global issues and a partnership based on shared values:
there is a high degree of compatibility between our political approach and that of the Brazilians. [...] Brazil is quite a good voice internationally in terms of our values. Rather than having the familiar cast list of European countries and North Americans making those points, there is the opportunity for a new voice to make points that we would support.155
120. Brazil has also chosen to act unilaterally to tackle climate change and the linked issue of deforestation. Ahead of the Copenhagen Climate Change Conference, Brazil unilaterally imposed binding targets on itself for the reduction of emissions. Brazil is legally committed to reducing its greenhouse gas emissions by between 36 and 38.9% by 2020. In addition,
149 Canning Lecture, 10 November 2011 150 Q 163 151 Q 57 152 Ev 46, para 17 153 Q 163 154 Q 59 155 Q 125
46 UK-Brazil Relations
the FCO states that Brazil has adopted an “ambitious” target to reduce levels of deforestation by 80%.156 Mr Norman suggested that these domestic efforts were a sign of Brazil showing international leadership:
It is bridging the divide between the traditional bloc of developing countries, and the G77157 and the developed countries. In the Copenhagen climate summit, it put its own targets on the table, quite explicitly, for a reduction of emissions against business as usual—36% to 39%. They are very firm targets, and were quite important in moving on the negotiations.
The rationale behind that was very much one of leadership. It was in a sense saying, “We will do this anyway, whatever other countries do.” This is pretty important.158
Mr Norman further suggested that Brazil was already a global leader on this matter and a key player in international climate change negotiations:
Because of Brazil’s moral authority on deforestation issues and its having a pretty clean electricity sector, it is in a position where others are potentially swayed by its arguments. It is looked up to within the G77, so it already plays quite a significant role.159
And Professor Hurrell noted that Brazil’s leadership on an issue such as climate change could be a sign of Brazil’s willingness to take an active stance on other international issues:
In a number of areas one can see an active realisation about ongoing engagement, particularly when the thing you are engaging with is changing. I think climate change is a very good example. Through the nine months before and up to Copenhagen we saw a lot of movement inside Brazil as well as in terms of positions outside.160
121. Despite the generally positive role that our witnesses had identified Brazil as playing in tackling climate change and deforestation, during the course of our inquiry the media reported one apparently retrograde development in this area. On 20 May 2011 it was reported that Brazil had formed a “crisis cabinet” in response to a 27% year-on-year increase in Amazon deforestation.161 This increase has been linked to higher demand for farmland for soy growing and the expected passage of a new law loosening restrictions on deforestation. Currently the law requires 80% of the rainforest to be left as untouched forest, but the proposed law will reduce this figure to around 50% depending on the type of land. The new law will also grant an amnesty to farmers who illegally cleared land between 1965 and 2008. The Independent reported that “in addition, farmers will, for the first time, be allowed to count land along rivers and lakes as part of their legal preserves. And strict
156 Ev 46, para 17 157 The “G77” was established in 1964 as a caucus of 77 developing countries within the UN. There are currently 131 members of the G77, including some “developed” or “semi-developed” countries, including China, India and Brazil. http://www.g77.org/ 158 Q 57 159 Q 64 160 Q 99 161 “Brazil forms “crisis cabinet” following unexpected deforestation surge”, The Guardian, 20 May 2011
UK-Brazil Relations 47
rules governing deforestation of hilltops and slopes will be relaxed.”162 It was claimed that this new law will lead to a further 10% reduction in rainforest cover.163
122. We raised our concerns over these developments with Jeremy Browne. We asked him whether the FCO had make representations to the Brazilian government on this matter. He assured us that:
Yes, we do have a view. Yes, we are concerned. Yes, we are making representations. My understanding is that this is a live debate, which we are keen to influence— primarily, it is an internal debate within Brazil, although it has wider ramifications. Our understanding is that the President is in a very strong or resolute position, which we approve of her being in.
123. Mr Browne also felt that President Rousseff was, “personally on the most environmental end of the scale [...] She favours Brazil continuing to meet the more onerous end of the targets—the 80% reduction.”164 Vivien Life of the FCO also noted that, regardless of these proposed changes to the Forestry Code:
Brazil has made commitments in the UNFCCC165 for an overall reduction in carbon emissions, and its 80% target with regard to deforestation makes up 50% of its ability to reduce emissions. So at the moment, Brazil is bound—not legally bound, because we don’t have a legally binding UNFCCC, but, given how Brazil wants to position itself as a leading green country, it is unlikely to want to retreat from the targets it is committed to in the UNFCCC.166
124. We welcome Brazil’s leadership role on international solutions to tackle climate change and the work of the FCO in promoting and supporting this position. We look forward to continuing close co-operation between the UK and Brazil on climate change, and hope that this forms the basis for a long-term relationship based on shared values. We recommend that the FCO continue to build and strengthen this relationship and push towards further agreements at the upcoming Rio+20 and Durban Conferences.
162 “Slash and burn; Brazil shreds laws protecting its rainforests”, The Independent, 26 May 2011 163 “Brazil’s lower house approves looser forest protections”, Washington Post, 26 May 2011 164 Q 165 165 United Nations Framework Convention on Climate Change 166 Q 166
48 UK-Brazil Relations
8 Conclusion
125. The FCO’s announced commitment to a stronger bilateral relationship between the UK and Brazil is much overdue and very welcome. The rise of Brazil represents a great opportunity for the UK, both as a source of a strong commercial relationship and in providing an increasingly important partner in tackling global issues. The potential commercial benefits are well known and understood, but in areas such as energy security, the environment and tackling international crime, a stronger bilateral relationship with Brazil will also be of great benefit to the UK.
126. It will be clear from our Report that Brazil’s increasing economic power and political influence is very much a “good news” story for the UK and the wider world. The overall assessment must be that Brazil is a democratic, well-governed, responsible state, unthreatening to its neighbours and with much to contribute to the international community. Nonetheless, it would have been remiss of us if we failed to deal with a number of issues which have the potential to undermine or deflect development of the desired stronger bilateral relationship. We hope that the UK Government will take such steps as are within its power to encourage Brazil further to improve its internal human rights record, to tackle problems of corruption, and to maintain a balanced and moderate stance on the Falkland Islands.
127. A closer bilateral relationship between the UK and Brazil can only be achieved over the medium term through sustained pressure and effort. The UK’s present strategy towards Brazil is encouraging; we urge the Government not to allow momentum to be dissipated or its attention to be distracted by more dramatic developments elsewhere in the world. We will continue to monitor developments throughout the current Parliament.
UK-Brazil Relations 49
Formal Minutes
Tuesday 11 October 2011
Members present:
Richard Ottaway, in the Chair
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Ann Clwyd Rory Stewart Mike Gapes Mr Dave Watts
Draft Report (UK-Brazil Relations) proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 127 read and agreed to.
Summary agreed to.
Resolved, That the Report be the Ninth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.
Written evidence was ordered to be reported to the House for printing with the Report, together with written evidence reported and ordered to be published on 11 May, 8 and 22 June 2011.
[Adjourned till Tuesday 18 October at 10.00am
50 UK-Brazil Relations
Witnesses
Wednesday 27 April 2011 Page
Neil Atkinson, Director, Energy and Utilities Research and Analysis, Datamonitor, Paul Domjan, Director, John Howell and Company Ltd., and Dr Frank Rosillo-Calle, Honorary Research Fellow, Imperial College London Ev 1
Mark Bishop, Head of Strategy, Co-ordination and Development, International Department, Serious Organised Crime Agency Ev 8
David Norman, Director of Campaigns, and Sandra Charity, Head of Forest Programmes, WWF-UK Ev 12
Wednesday 11 May 2011
Nicholas Armour, Director, International Group, UK Trade & Investment, Tony Lamb, Latin Americas Team, International Group, UK Trade & Investment, and Philip Brown, Trade Policy Unit, Department for Business, Innovation and Skills (BIS) Ev 16
Professor Andrew Hurrell, Montague Burton Professor of International Relations, University of Oxford, and Dr Marieke Riethof, Lecturer in Latin American Politics, Institute of Latin American Studies, University of Liverpool Ev 23
Wednesday 8 June 2011
Mr Jeremy Browne MP, Minister of State, Foreign and Commonwealth Office, Angus Lapsley, Director, Americas, FCO, and Vivien Life, Acting Director, Prosperity Directorate, FCO Ev 30
List of printed written evidence
1 Foreign and Commonwealth Office (FCO) Ev 44, 69, 71 2 Embassy of Brazil Ev 48 3 Serious Organised Crime Agency (SOCA) Ev 53 4 WWF Ev 54 5 Michael Evans Ev 54 6 Dent Associates Ltd Ev 55 7 Professor Dr Gisele Araujo Ev 57 8 TheCityUK Ev 62 9 British Council Ev 65 10 BBC World Service Ev 66 11 BG Group Ev 67 12 Mr Jeremy Browne MP, Minister of State, FCO Ev 67
UK-Brazil Relations 51
13 Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, FCO Ev 68, 69 14 Embassy of the United States of America Ev 69
List of unprinted evidence
The following written evidence has been reported to the House, but has not been printed and a copy has been placed in the House of Commons Library, where it may be inspected by Members. A copy is in the Parliamentary Archives (www.parliament.uk/archives), and is available to the public for inspection. Requests for inspection should be addressed to The Parliamentary Archives, Houses of Parliament, London SW1A 0PW (tel. 020 7219 3074; email [email protected]). Opening hours are from 9.30 am to 5.00 pm on Mondays to Fridays.
Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs
Foreign Affairs Committee: Evidence Ev 1
Oral evidence
Taken before the Foreign Affairs Committee on Wednesday 27 April 2011
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Ann Clwyd Rory Stewart Mike Gapes Mr Dave Watts ______
Examination of Witnesses
Witnesses: Neil Atkinson, Director, Energy and Utilities Research and Analysis, Datamonitor, Paul Domjan, Director, John Howell and Company Ltd., and Dr Frank Rosillo-Calle, Honorary Research Fellow, Imperial College London, gave evidence.
Q1 Chair: I welcome everybody to this session of whose numbers you believe, so this is a very the Committee, our first oral evidence session for the significant, almost game-changing find in global Committee’s inquiry into UK-Brazil relations. The terms. As for what it will mean for Brazil itself, as I purpose of this session is to examine three discrete said a moment ago, Brazil’s own demand for oil will areas of activity in Brazil that directly affect the UK’s continue to rise quite strongly because its population interests: energy security, crime and the environment. is rising fast and its economy is developing fast, so it I start with an apology for the fact that the witnesses will have a large own use for oil; however, if it is and members of the public have been kept waiting. successful in developing the pre-salt reserves of 80 We had a rather pressing matter to attend to, and I billion barrels, in addition to the other resources it thank you for your indulgence. has, Brazil will be, or should be, in a position to be a I give the first three witnesses a very warm welcome. significant exporter. Brazil is going to have an It is very much appreciated that you have taken the increasingly important role to play in the global oil time to come and see us. Perhaps I could start the and gas picture for the next 20 or 30 years or so. questioning on the oil sector. Could you set out how Paul Domjan: I agree with that. I think the discovery important you see the sub-salt fields are both to global is on a global scale, but I would argue that if we look oil production and to Brazil as an aspiring power? The over the next 10 years—I will take this from more of recent discovery of what has been a pretty substantial a supply side than a demand side—it still is primarily oilfield there is obviously of huge economic and a Brazilian story. If we look at Petrobras’s numbers, political impact, and I would be interested to hear we are talking about something in the order of 1 your views. Mr Atkinson, do you want to go first? million barrels a day in incremental production by Neil Atkinson: I am happy to start on that one. We 2020, which is 1% or 2% of global production at that face a situation where demand for oil is continuing to stage. What we have already seen, though, is that increase at a fairly rapid rate for the foreseeable Brazil’s success with the drill bit, at expanding future— production, has made the world’s ninth-largest energy consumer, and its eighth-largest economy, a net oil Q2 Chair: Globally or nationally? exporter, as Mr Atkinson just said, which has had a Neil Atkinson: Globally, led of course by developing major impact on Brazil’s reserves and balance of countries such as China, India and indeed Brazil itself. payments, as well as contributed to stabilising the The issue will arise more urgently over the next world energy system. decade or so of the challenges to meet that demand By 2020 the pre-salt will account for 25% of Brazilian by finding oil and gas around the world. There are production, which will make Brazil a meaningful oil people, of course, under the heading of peak oil, who exporter, with something in the range of 1 million to believe that the challenge of finding that supply will 1.3 million barrels a day of exports. In terms of be more difficult than others believe. Brazil’s total economy, however, oil exports will rise To cut to the chase, Brazil in the past few years has from 9.5% of total exports today to approximately become an increasingly important source of future 38% of total exports. That increases the share of supply. The pre-salt reserves, which were estimated at Brazil’s top three exports, which we treat as a measure something like 80 billion barrels, are an enormous of export concentration, from roughly 26% to 60%, so find, and an enormous source of future supply. To put it has a major impact on the shape of Brazil’s that into context, the current crude reserves of the UK economy, if not on the global energy system in quite are something in the region of 3.5 billion to 4 billion the same way. barrels, depending on whose figures you believe, and One of the most important impacts on Brazil will be the crude reserves of Saudi Arabia are something in the debate on establishing a sovereign wealth fund. the region of 250 billion barrels, again depending on Brazil could today establish a $110 billion sovereign Ev 2 Foreign Affairs Committee: Evidence
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle wealth fund, roughly on a par with Russia, and still be challenging. Can you see economic difficulties maintain its import cover at seven months, which we with this field? Are there any lessons to be learned consider a benchmark. Today, Brazil has a fund that from the feasibility of extracting oil that we had in the invests in state companies, but not one that saves Falkland Islands, which turned out to be rather foreign currency earnings. Obviously, this production expensive? will be a huge source of new foreign currency Neil Atkinson: I think the Falklands is rather small earnings. For that reason, when we think about the beer compared to what we are talking about here. UK-Brazil relationship, we should be thinking about Somebody 40 or 50 years ago promised to drink every the financial side as well as the oil side, because of drop of oil that would be produced in the North Sea, the revenue the oil will produce. and I am tempted to offer to do the same for Falklands Dr Rosillo-Calle: I apologise to the Committee—I oil. That is probably a reckless promise, but the have a very bad throat, so if I talk too low, please let Falklands is small beer. me know. Brazil is hugely serious because of the vast quantities, Chair: I will wave my pen. but also because of the fact that a very high proportion Dr Rosillo-Calle: Okay. I agree with what Paul and of Brazilian oil is produced in very deep waters, so it Neil said. One thing that has not been mentioned here is very technically challenging and very expensive. As is that, according to quite a few studies, Brazil has we move forward, we think Brazilian production reserves of between 70 billion and 100 billion barrels, could rise to over 5 million barrels a day or so by and some other studies point to even higher volumes. 2020 or 2025—something like that—and over 3 In future, Brazil is going to be a major player, I am million barrels a day of that production will be from convinced of that. I have my data here.1 Brazil has deep waters, which is essentially below 2,000 metres. about 7.5 million square kilometres of sedimentary That is a massively challenging resource to exploit, areas, of which only 4% have been fully explored, so which raises questions about how it is going to be there is huge potential. I do not know whether more done and by whom, because—forgetting the capital oil will be found, but all the new studies indicate that for a moment—the expertise required to carry out the potential is far greater than thought up till now. investments of that type, and successfully and safely Another point I would like to make is that Brazil is in to produce the oil, is the kind of expertise that Brazil a unique position in the world because, contrary to has a great deal of, or some of, but it will almost many other oil-producing countries, Brazil has certainly require external help. To receive that external something unique: it has a path that will enable it to help and investment, it will need to offer an become energy self-sufficient.2 Brazil can produce a investment climate that is attractive to people with the lot of energy now and will be able to do more in the expertise, which raises a whole new question about future. Brazil already produces about 46% of all how it will develop the resources. They are very energy consumed in Brazil from renewables. It also challenging because they are in very deep waters. The has a biofuel industry which is the most important, salt resources are, I think I am right in saying, well developed and economically viable biofuel probably the biggest discovery and potential programme that we have in the world today. To that, development of its kind we’ve ever seen around the you have to add the potential agricultural production. world, although there have been other examples. Everything is intertwined, so the country relies not only on oil but also on the biofuel, renewable energy Q5 Chair: With the Americans calling yesterday for and agriculture sector. The country has enormous an upping of production to push the price down, policy flexibility to become a major exporter of oil would a falling price actually affect the economics and also be able to diversify the energy supply. of this? Neil Atkinson: Yes. These are very broad indicators, Q3 Chair: Do you think Brazil’s energy credentials but obviously the more technically challenging the are damaged by the discovery of this field? prospect is, the more expensive it is to develop. There Dr Rosillo-Calle: No, I don’t think so because in the are very ballpark figures, but if the oil price were to past, people said, what happens to the biofuel fall—it is actually quite unlikely—below $60 or $50 programme if Brazil becomes energy self-sufficient if a barrel, a lot of the more technically challenging large amounts of oil are discovered? It is very difficult resources, such as the Brazilian fields and other places to say, but I think the Government have realised that around the world, such as the Canadian tar sands, keeping the biofuel programme for environmental, would be questionable. However, that is highly socio-economic and political reasons, is more unlikely, and in any event the call from the Americans important than shutting it down. The policy is to keep to produce more to put the price down is a typically producing oil, become a major exporter of oil, develop facile response to high gasoline prices. the biofuel industry which will be largely used in the domestic market, and also become an exporter of Q6 Chair: Will anyone have a stab at what the price biofuel, because Brazil has the capacity and skills to per barrel would have to be to make it economically do so. viable? Neil Atkinson: For Brazil, I think at least $30 to $40 Q4 Chair: Can you tell us how difficult it is to a barrel—something like that. exploit these fields? The high costs of doing it must Paul Domjan: If we think about marginal supply and 1 Note by witness: there is significant data to support this view. the price falling, there’s a lot of supply that goes 2 Note by witness: Brazil is already almost self-sufficient in before Brazil, so this isn’t really a price-driven game energy and could become a significant exporter in the future. in that sense. Supply will contract and push prices Foreign Affairs Committee: Evidence Ev 3
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle back up before it gets to the level at which this starts $50 or $60, because some of those findings are in very to become uneconomical. deep water. Neil Atkinson: Operating costs are the key to keeping Brazil now offers one of the best environments for oil production going. Most of the production around foreign companies. In fact, all the main oil companies the world is from mature fields, where the capital are investing in Brazil. All the big companies are costs were sunk years ago. As long as operating costs bringing their own technological know-how— have been covered, which are significantly lower than especially the British in the North Sea—which is $30 or $40 a barrel in most countries around the being applied to Brazil. There is a very important role world, it isn’t an issue. for the UK to transfer more know-how to the Brazilian Paul Domjan: I would agree that technically it is side. North Sea oil is very difficult to extract, because something that Brazil has the expertise to do, but if the weather is far rougher than it is in Brazil. There is we look at the scale of the challenge financially, these a lot of potential co-operation here, which is already are $100 million well completions, which are happening now that the oil companies are putting a expensive wells and that is one of the main sources lot of money into the Brazilian oil industry. of cost. Paul Domjan: It goes to the core of the technical challenge, which is that Tupi, the first pre-salt field, Q7 Mike Gapes: There has been a lot of commentary has been online for two years, so the technical over the past couple of years about the impact of so- challenge is addressed. This oil is successfully called peak oil. I am interested to know whether the produced; it is technically possible. The question is Brazilian discoveries are factored in to that equation, then about mobilising the human capital—the physical or whether what is happening in Brazil actually capital, the financial capital—to expand that. changes the debate and moves the crisis point forward Between now and 2014, Petrobras plans to invest several years or decades. something like £224 billion globally, about half of Neil Atkinson: I started analysing oil markets for the which will go into the pre-salt. But there are real very first time in about 1980 or 1981, and at that time questions, given Petrobras’s financing situation, about peak oil was supposed to have arrived by about 1990; whether it will be able to come up with the financial by 1990, it was 2000; by 2000—and so on and so on. resources. If it is going to be the operator of all these Inevitably, a day will come. fields, will it have the engineering capability and the The point is that the Brazilian discoveries are exciting physical plant to be able to do what it plans? and they will yield much higher production from Brazil as we move forward, but there are other places Q8 Mr Watts: Can I follow that up? What around the world where production is falling. Here in opportunities are there for British companies with the the UK is the most obvious example, perhaps not discovery of the sub-salt fields? What are the Foreign helped by recent tax changes—or maybe they won’t and Commonwealth Office and UKTI doing to have an impact; we will wait and see—but there are maximise the potential for the British economy out of other countries where production is falling. the finds in Brazil? The issue is whether technological improvements and better knowledge of reservoirs, as we gain it, will Paul Domjan: I can talk about the opportunities; I enable more to be produced than was previously cannot comment on the FCO’s ability to recognise expected from existing fields. So far, we are producing them. Brazil has recently changed its regulatory more than we thought, and the day when peak oil environment to make Petrobras the designated really comes—when total world supply can go no operator, which has been greeted with some disdain higher, and will only start to fall—has been pushed in the UK. However, there are some good reasons why back well into the next decade, I believe. the Brazilians want to do that. That is not necessarily Paul Domjan: There is another wrinkle to it, which an impediment to UK investment—it does not prevent is important in the energy security area in particular. it. Petrobras will still need financing and technical We can divide the world’s oil into three buckets: the support. It will still need to rent vessels, and it will oil that is technically relatively easily accessible in need engineering and a whole range of other services. stable, mostly democratic countries that are easy to do The UK is a world leader in all those areas. Petrobras business in; the oil that is technically accessible in will need to raise another $60 to $70 billion, if I politically challenging environments, which may not remember correctly. The City of London is one place be politically accessible; and technically difficult oil. to do that. The Brazilian market will need to build That creates what I would call a political peak oil literally dozens—perhaps as many as 100—of new problem. We would not be in a peak if we could drill ships, staff those ships with engineers and hire exploit all the resources that are out there, but there contractors to do all that work. A lot of those are some very large resources—whether they are in contractors will be UK-based, from Aberdeen. The the Middle East or the US outer continental shelf— real competition is the extent to which there is a that are simply off the table for political reasons. tension between developing a domestic industry, Neil Atkinson: That answer will segueway neatly into which Brazil is keen to do, and bringing in foreign the third part of the set of questions, which involves contractors, whether they are from Houston or Brazil’s relations with organisations such as OPEC, so Aberdeen. There is a role for the FCO and UKTI: to I suspect that we may come back to that. what extent can they show the Brazilians that working Dr Rosillo-Calle: Brazilians admit that the costs of with the UK is an opportunity to develop the domestic production vary. My data showed me that in some of industry, rather than a zero-sum game for the the deep water, it is about $40, but in others it is about domestic industry? Ev 4 Foreign Affairs Committee: Evidence
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle
Q9 Mr Watts: Are there any signs that we are taking Brazilian engineers, and develop an industry in Brazil those opportunities? Are we out there in numbers? that is world class. Paul Domjan: BG has a project there in the Brazil is already, for example, in discussions with international oil company space. The real opportunity Pemex to export Petrobras expertise to Mexico. It is is not going to be the international oil companies as very pleased to be seen as a world leader in deep- equity participants; it is going to be the service water expertise, and the UK can help build that. That companies that are supporting Petrobras. That’s where is particularly important if you look at the structure of I think there’s still a big game to be played. the Brazilian industry. Normally, you expect a whole Neil Atkinson: There are opportunities, as we’ve said. collection of smaller firms that are very innovative, What we must remember is that there are which then contract to large firms, with technical opportunities, first, because the Brazilian innovations flowing down from large firms but also up opportunities themselves are good, but also because from small, innovative service companies. In Brazil, other countries around the world are becoming technical innovation is clustered in Petrobras. The increasingly hostile to the international oil companies kind of community of smaller firms that make an and the international equipment manufacturers, for innovative cluster is not there, so that’s then an their own reasons. It is no longer so easy for foreign opportunity for the UK firms to help develop Brazilian companies to operate in, for example, Venezuela or subsidiaries that will meet part of the Government’s Russia, and there are other examples that we could goal by becoming this broader, innovative cluster. choose. One of the overall problems that the international oil companies face, as well as the Q11 Mr Watts: Would I be putting words in your manufacturers and service suppliers, is that they are mouth if I suggested the answer to the question is opportunity constrained in many cases. Brazil is a that the changes have taken place? More control being favourable environment and a huge opportunity, so taken by the Brazilian government means that the they should be all over Brazil like a rash, frankly, relationship between anybody and the Brazilian because it is one of the best opportunities on the planet government will be a crucial factor in success out there. Would you go as far as to say that? for British companies and anybody else with deep- Paul Domjan: I would put it slightly differently. The water expertise in particular, which we have. degree to which the aims of the Brazilian government Paul Domjan: One way to think about this is that the are supported will be crucial to success. regulation says Petrobras must be the operator, and it must have up to 30% stake in oilfields. Given Q12 Mr Watts: To do that, you’d have to have a Petrobras’s financial resources, that probably means relationship and you’d have to know what they want. that it will have a 30% stake in oilfields, so there is Paul Domjan: For certain. A lot of these smaller 70% equity participation left to play for in the contractors won’t have a direct relationship with the international arena. On top of that, this kind of blanket Brazilian government, but they will be supporting the operatorship—and we have seen this in other Government’s policy aims through their relationship countries such as Kazakhstan, where there is a variant with Petrobras. of it, to some extent—means a lot of opportunity for foreign companies to come in as co-operators, joint Q13 Mr Ainsworth: Can we shift to ethanol? Brazil operators, or as technical operators on part of the has almost a monopoly of sugarcane ethanol, which project, so there’s still a lot of scope for the UK to has a higher conversion rate there than other forms of play a part in this. ethanol. What are the politics of that? Is there political significance to that monopoly and the way in which it Q10 Mr Watts: You touched on the decision by the would pan out if it was an oil situation? Brazilian government to take more control over their Dr Rosillo-Calle: I think things have changed since oil company and also over the salt fields. What the alcohol program started in 1975. The industry was implication has that got for the future relationship then dominated by domestic capital. They did not like between British companies, potentially, and Brazil? foreign capital. That has changed and I think in the Paul Domjan: British companies need to understand last 15 years—no, less than that; maybe five or seven what the Brazilian government’s motivation is, respect years—the industry realised that it needed foreign that, and ask how Britain can help to advance that capital to invest. They allow a lot of foreign capital. motivation. I think that motivation has, at a very high For example, BP has recently acquired about 60%3 level, three components. One is maintaining a role in of a big company and is investing something like directing the course of pre-salt development, and that $3004 million. Like BP, you have Shell and many may include slowing the speed of pre-salt other oil companies, and other biofuel producers in development to an extent. Oil often appreciates more Europe are investing in Brazil. quickly in the ground than in the financial markets as Brazil is unique because it has a long historical revenue. It means maintaining a substantial share of experience in using sugarcane, which is a very good that revenue, both as licence payments, and as equity raw material. It is very efficient and economically in Petrobras and dividends of Petrobras to the state. viable and here a distillery is the closest we have to a However, I think the third one, which really gives an biofuel refinery. You produce ethanol, sugar and all opportunity to the UK, is developing the local oil the heat and electricity that you need for your services industry. It is about UK companies showing operation. You have an efficient boiler and you can that they can actually be partners with Brazilian firms, 3 Note by witness: should say 83% of shares. that they can develop Brazilian expertise, train 4 Note by witness: should say $680. Foreign Affairs Committee: Evidence Ev 5
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle produce surplus electricity that you can sell to the very little in common politically, other than the national grid. On top of that, you can produce animal ownership of large oil reserves? It wishes to see those feed, CO2, yeast and so on. reserves developed and attract foreign investment to A lot of capital is moving in now. It is opening a lot help that process, but the only way it can attract that and there are many good opportunities for the UK, foreign investment, and indeed reward its domestic basically helping the Brazilians to develop sustainable investors, is by providing a return. That return is criteria. I have some further points to make. At the provided by increasing production and selling the oil moment, you need to ask for greater co-operation on to markets that are growing. the research and development of biofuel—especially The OPEC countries are different from Brazil in that R & D on second and third generation. You need to they are sitting on reserves that, as a proportion when help rather than impose sustainability criteria on the set against their population and various other Brazilians, and there are also the agricultural issues. indicators, are absolutely enormous. They have the We need to develop a mutually agreeable certification ability to limit their production from time to time scheme. The UK has a good experience with the without significantly damaging their economy, should renewable transport fuel obligation. It can play an they wish to protect oil prices. Rather like the United important role in opening up the Brazilian market, Kingdom in the 1970s and 1980s when production which will be a major exporter, and the cheapest, so I was growing, Brazil has nothing in common with any think there are many opportunities for UK companies kind of OPEC strategy. I do not believe that Brazil to co-operate with the ethanol production industry. will ever join OPEC in the same way that Kazakhstan, another rising producer, has shown no sign Q14 Mr Ainsworth: What effect do the import tariffs whatsoever of joining OPEC. Despite efforts by that the EU maintains on ethanol have on EU- OPEC in recent years, Russia shows no signs of Brazilian relations? joining, and the OPEC organisation, particularly in the Dr Rosillo-Calle: There have been many problems current environment where oil prices are very high, and I think Brazilians have complained about that. can continue to produce pretty well as much as it One thing we need to do—Europe and the UK, which needs. It is a fairly toothless organisation these days have very strong free market philosophies—is that all anyway. the import tariffs should be, if not abolished, at least You talk about critical relationships. The BRIC reduced considerably. If you want to compete, you countries—Brazil, Russia, India and China—have should not use high tariffs. We need import tariffs that held, I think, more than one summit now. There was are economically viable, which does not happen in one quite recently in India. A political entity of some Europe. There needs to be a balance here so that some sort is beginning to emerge as a grouping of the BRIC tariffs might be applied, but they have to be much countries, and Brazil is beginning to assert its lower. The UK could help a lot in achieving those increasing wealth on the world stage. It has forged things. other political relationships with countries such as Iran and Venezuela. I may be missing another member of Q15 Mr Ainsworth: Why have we maintained the bad boy’s club—ah Cuba; who could forget Cuba? those tariffs? Brazil is forging its own way as it becomes Dr Rosillo-Calle: As I see it, it is because Europe— increasingly assertive, but I do not believe that in the basically, France—has a lot of potential to produce long run it will join the oil producers club, because it ethanol, and the raw material is the key factor. The is not in its interests to do so. raw material in Europe is very expensive. Therefore, Paul Domjan: I certainly agree with that. It is a way of protecting the domestic supply is to impose reasonable to say that Brazil will probably be happy a high tariff, so you can compete. Somehow, we need with oil prices in the sort of $70 to $90 region. That to look at that, because it is not fair that the less would be more than adequate and OPEC is perfectly efficient producer is supported while the more happy with that. If there is any benefit to working with efficient are penalised. OPEC, it would be only from the outside in the way that Russia occasionally does. It is important to bear Q16 Mr Roy: Turning to oil and diplomacy, I have a in mind OPEC’s desire to maintain prices. Its target three-part question. How has Brazil’s oil wealth price has probably risen a bit now that Saudi Arabia affected its foreign policy? Is it fair to characterise it needs to pay for the gift that the King has just given, as being more assertive as a result of the increase in which is probably something like $10 a barrel in Saudi oil? Specifically, have UK-Brazilian relations changed production for the next five or so years. because of the oil wealth? Thirdly, we spoke earlier There is another interesting wrinkle to this, which is about oil prices in relation to OPEC. Will a new more that Brazil is in the process of shifting to a more statist aligned alliance of Brazil, Russia and so on be a direct approach to industrial policy. As a growing oil competitor to OPEC? exporter, and a country that already has substantial Neil Atkinson: I have been a camp follower of OPEC foreign exchange reserves of $240 billion, there is a for many years. I worked for many years for the question about to what extent Brazil would be tempted national oil company of a country that is a member of to and choose to use its national reserves to support OPEC, and I used to support the OPEC delegation. I its national champion industries abroad. Whether that believe that OPEC is an entity that countries are more would mean taking a role similar to that of China, or likely to leave than to join, and there is a simple a more benign role that involves less direct foreign reason for that. Why on earth would a country like assistance, we do not know. It may be that Brazil does Brazil wish to join an organisation with which it has not choose that path at all, but it is certainly a question Ev 6 Foreign Affairs Committee: Evidence
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle that is being actively debated, particularly as Brazil market for manufactured goods. We need to bear in increasingly looks to China as a potential model for mind that Brazil is still going to be a middle-income, industrial policy. manufacturing, and as Dr Rosillo-Calle said, very Neil Atkinson: Brazil’s ultimate objective, if I diversified economy. understand it properly, is a seat on the UN Security It is important that we keep bioethanol in perspective. Council. It has been a huge success in Brazil, but that means it has displaced something like 14% to 17% of Q17 Chair: A permanent seat? transportation fuels. It is 4% of Brazil’s energy, as Neil Atkinson: Indeed. Obviously, Russia and China opposed to 41% for oil and 39% for hydro. It is an are already there. India and Brazil are not, but they important export earner, but it’s not going to drive are of course rising significantly in international Brazilian international policy in the way that even oil importance. The ultimate goal of Brazilian diplomatic or manufactured goods would. policy would be to become a permanent member of the Security Council, so it will always seek to act Q19 Rory Stewart: To keep hammering the simple responsibly and fairly, balancing the interests of the point: are there any specific political security or different blocs around the world, which is why I do defence threats posed by Brazil’s emerging wealth? Is not believe it would touch an institution like OPEC there anything that you could see over the next 20 with a bargepole. Brazil is looking to achieve that years which the US, the UK or the West should be objective—to cement its place at the top table as a anxious about? great country, a big powerful country with a huge Paul Domjan: I would not say anxious. I think there industrial base and take what it thinks is its rightful is an opportunity. Mr Atkinson alluded to Brazil’s place. desire to have a seat at the top table in international Dr Rosillo-Calle: Brazil is very unlikely to join OPEC affairs. One can characterise Brazil as a responsible, because the economy in Brazil is very different. You developed market economy with a strong democratic have three key sectors: oil; biofuels and renewable foundation. It is the country that we would like to energy; and agriculture. Brazil doesn’t depend on oil have at the top table in international affairs. We would as a major revenue. It is only part of the revenue for like to shoulder a larger share of the burden. I am Brazil. It is not a major revenue. Because it is very much less troubled by Brazil’s emergence than I might diverse, I think, as Neil said, there is no incentive for be if it had happened in many other places. It is very Brazil to join OPEC. encouraging. We just need to keep a dialogue with Brazil. The danger is to push Brazil very quickly into Q18 Mr Roy: What unique attitude does Brazil’s a sort of caricature position because it is now a major new oil wealth bring to its foreign policy, if any? oil exporter. It does not change what Brazil is, which What does Brazil have that other countries that have is not fundamentally about oil. no interest do not have? We know that they have spent Dr Rosillo-Calle: Brazil is not China. Brazil shares an awful lot in Haiti, for example. Do they have a the philosophy and culture of the western world. favoured area or region of the world? Do they have a Brazil has been very focused on either the United favoured project type mentality towards anyone else? States or Europe. I do not think that it is possible for Neil Atkinson: I am not aware of that. any Brazilian government just to refocus completely Dr Rosillo-Calle: My understanding is that the and say we are going to be totally independent. China Brazilians so far have earned a lot of money from oil, poses a greater danger; it is a very different culture. I but the money they have earned has gone into two do not think that that will happen with Brazil. It shares areas. First, they have reinvested it in the oil industry too many of the values of the West. However, politics for new exploration and, secondly, they have is impossible to predict. distributed it in social uses. For example, Brazil is a very unequal society. Former President Lula and the Q20 Rory Stewart: What are the implications for the new Government are putting a lot of emphasis on UK Foreign Office in engaging with Brazil over the reducing poverty, so a lot of funds from oil revenue next 10 to 12 years? How should we be using the are going to be redistributed across society. That is levers to help move Brazil into such a position? What my understanding. should we not be doing? Paul Domjan: I think it is important to keep this in Dr Rosillo-Calle: The UK has to take into account perspective. In 2020, Brazil’s economy will not look that Brazil is unique. I say “unique”, because it has like Saudia Arabia’s. It will not look like something that would benefit your country. It has a Kazakhstan’s. It will look like Mexico’s or Malaysia’s huge amount of energy resources. It has a lot of in terms of the scale of oil production in the economy, natural resources that are used in different ways, for so it is not necessarily a fundamental change. It will example, biofuels. The Brazilians are also very keen not turn into Saudia Arabia. It will still be a diversified to export agriculture products. Brazil has perhaps the economy. The Brazilian trade mission to China last greatest potential in the world when it comes to month focused on industrial exports. The 300 business agriculture. Agriculture is very important for Brazil, leaders went to China to sell jets, trains and for the economy and for export. Brazil is looking at manufactured goods. It is very different from what the European Union especially, and the US and also you would expect of a trade delegation from an oil- China because China will import a lot of products. dominated economy. What Brazil is looking for in There are many areas on which to co-operate. Do not China is not a market for its oil. It has that. It is not think of Brazil as only having one area with which to an investor in its oil. It knows it can get that. It is a work. There is energy, agriculture and many other Foreign Affairs Committee: Evidence Ev 7
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle areas. You need to look at the country as a whole problem. The UK is in a very good position to offer rather than focusing on a particular area. That is how local capacity building in this area through to keep very much involved with the Brazilians. universities, corporations, grants, or whatever. I think Paul Domjan: I certainly agree. Brazil’s export it is an important area because the UK has been structure today is, first, iron ore, then petroleum, then leading in the North Sea for many years and it has sugars and sugar-related products such as ethanol, very good universities, which can prepare a lot of then manufactured goods. The real opportunity for the good people in the petroleum industry. Looking at the UK at the moment is to look at how all that is relationship between the UK and Brazil, I see that that producing substantial export earnings, substantial is an area which offers good possibilities. People do foreign currency earnings and substantial appreciation not come to the UK because there is no sufficient of the real. It raises a risk and an opportunity. The risk grant or the cost of coming to the UK is too expensive. is that Chinese economic growth falters, which is If there could be a way of having more scholarships, quite plausible—that will be an interesting topic for a or something like that, it would be worth considering. future hearing—as a result demand for many of these Paul Domjan: We can even take that one step further, products falters, and we have some really serious which is that UK companies—I started my career at short-term economic problems in Brazil because of one of them—often see local content as an obstacle. the collapsing commodity prices. Brazil is They expect HMG, the FCO, BERR, the DTI and increasingly tied to global commodity markets, but UKTI and everybody to be fighting against local not exclusively global oil markets. It would be a content requirements, but local content requirements challenge for the UK to manage its relationship with are a very reasonable thing if you are an oil-producing Brazil and to ensure that Brazil still sees opportunities country. Oil production employs very few people, and in working with the UK in that type of environment. it employs people with a very narrow set of skills. The real opportunity that I want to focus on—it is There are only two ways that you can really turn that important for determining the course that Brazil takes, into a long-term industry: you save the money and use as well—is for the UK to work with Brazil to it to develop other industries, or you export oil encourage it to set up a framework for managing all of services. Texas, where I come from, has almost no oil its revenue. Such a framework would usually include left, but it produces lots of oil; it just produces it in establishing some sort of sovereign wealth fund and other countries, and that has become a growth rules for how the revenue will be used—when it can industry. come on to the budget, when it needs to be saved There is a real role for the British Government overseas and doing that to prevent foreign currency institutions, particularly for UKTI, BERR and the appreciation. That would benefit the UK directly FCO, to help companies understand that Brazil’s local because some of that money would come here to the content requirements are not something to fight City of London. against, that opposing them isn’t a core part of UK There is a real role for the UKTI that I personally foreign policy in Brazil—that, in fact, they are an think it does not fully appreciate in promoting the City opportunity for UK companies. They are an of London as a source for saving oil revenue. It is also opportunity for UK companies to become partners important because it helps to support the institutions with Brazil and an opportunity for UK companies to that Brazil needs to remain a robust democracy in the establish a base from which to supply the rest of the face of substantial oil revenue. You need transparency Americas; for example, to leverage. It is notable that about revenue, very clear rules that require revenue to when Pemex was developing its policy for opening be debated in Parliament, and obstacles to using and reorganising the Mexican oil industry last year, it revenue to win elections. One-off windfall revenues looked to São Paulo and not to Houston or Aberdeen and substantial oil revenues should be saved for the as a source of expertise. UK companies in São Paulo future. That this generation has produced a one-off would be participating in that, and that is an endowment does not mean that only this generation opportunity that you—the UK Government as an should exclusively benefit from it. Encouraging Brazil institution—need to help UK companies to see more to set up that kind of revenue management framework clearly. will do a lot both to keep Brazil on the right sort of Neil Atkinson: But there will always be strong path as a responsible oil producer and to strengthen competition for skilled engineers and engineering the UK-Brazil relationship. resources from many places around the world. In a previous role, I worked in a British company offering Q21 Chair: We think we have asked you all the consulting services in the oil refining industry. Finding pertinent questions, but have we missed anything? In skilled chemical engineers and other forms of process the couple of minutes we have left, are there any engineers to work on projects around the world was points on aspects of energy security that you think we extremely difficult—frankly, we were raiding golf haven’t covered? courses to find retired people and bring them back into Dr Rosillo-Calle: One thing that the UK needs to pay play. There is a very serious point that the oil industry more attention to is capacity building in the oil in many parts of it is an ageing industry. Because it industry. It is a problem for anybody who works in has tended, historically, to be a boom and bust the oil industry that a lot of its people are getting old. industry, during the bad periods recruitment dries up, At the Imperial College, we had a meeting and all people are fired and they go off into other work, so major energy users came to us saying “We have a when a boom returns and good days come, there just problem”, and the problem was they had no aren’t enough people to staff projects. Companies are sufficiently skilled personnel. Petrobras also faces this now roaming the world, looking for people with skills Ev 8 Foreign Affairs Committee: Evidence
27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle and there is very, very strong competition everywhere. Chair: Thank you all very much. It is really Brazil, to the extent that it will need foreign expertise, appreciated that you have taken the time to come here. which it will, will have to fight against competition As we have a Division in one minute’s time, I propose from many other countries around the world. to adjourn until 4.15 pm if there is one vote and 4.25 Chair: Opportunities. pm if there are two. Neil Atkinson: Indeed. Sitting suspended for a Division in the House.
Examination of Witness
Witness: Mark Bishop, Head of Strategy, Co-ordination and Development, International Department, Serious Organised Crime Agency, gave evidence.
Chair: I welcome colleagues back from the Division. That is growing, and it is a particular focus for our Welcome, Mr Bishop. I apologise for the fact that we partners in the Brazilian federal police. are running a bit late. Q25 Mike Gapes: Is that mainly based on imported Q22 Mike Gapes: Mr Bishop, can you tell us cocaine? something about crime in Brazil? How serious is Mark Bishop: It’s cocaine that is routed through the crime in Brazil, and how does it compare with other country, but a percentage of that is for the internal countries in Latin America? market. Mark Bishop: We can comment only on the organised crime aspect, because that is primarily what we focus Q26 Mike Gapes: You have referred to the favelas. on. We collaborate with Brazilian partners to combat There have been, as I understand it, attempts in the a range of mutually important organised crime threats, last six months or so to have a co-ordinated clearance, including cocaine-trafficking, cybercrime, financial including shoot-outs, and the figure that I saw was crime, people-exploitation and people-trafficking. that 37 people died in the operations. Is that popular Brazil is not a significant drug producer. However, it with the public? Is there a public perception that you shares borders with key cocaine-producing countries. need to take a “no holds barred” policy and just get The 40 large container ports on its coast have the places cleaned up? contributed to it becoming a major transit route for Mark Bishop: This is one that, following Baroness cocaine from South America to mainland Europe and Neville-Jones’ visit, the Home Office examined in Africa. There is limited intelligence to suggest that it some depth, and it will be able to comment in much is a direct cocaine threat to the United Kingdom. more detail on the particular favela policy. There is some evidence of commercial consignments going directly to the UK, but primarily, the key nexus Q27 Mike Gapes: You’d rather not comment on that. points are from Brazil into Europe and Brazil into Mark Bishop: I’d rather not go there. I don’t think West Africa, which in turn relates to indirect supply that that is my particular area of expertise. That’s on to the UK from there. about internal Brazilian activities.
Q23 Mike Gapes: You have talked about the cocaine Q28 Mike Gapes: Can I ask you about prisons in issue, but I am initially interested in talking about Brazil? Do you have any knowledge of them? crime overall in Brazil. I understand that it has a high Mark Bishop: I don’t. murder rate and that there is a serious problem with areas of the country where the security level is very Q29 Mike Gapes: Okay. I was recently at an Inter- low. Can you comment on that? Parliamentary Union meeting where we had a Mark Bishop: There are, for example, 600-odd discussion with people dealing with prison policy in favelas—shanty towns—in Rio de Janeiro. The State certain countries in Latin America, and comparisons Secretary for public security in Brazil aims to pacify were made between different countries, and I would some of those areas before events such as the World be interested to know what the perception is of what Cup in 2014. What the Brazilian police do is drive out happens to people when they are locked up. Is there a the leaders of the criminal gangs through sustained rehabilitation programme? Is there a diversion action, which they follow with a phase of stabilisation, programme? Or do the prison estate and the prison including education, public health projects and policy contribute to long-term difficulties? community policing to gain the trust of the area. There Mark Bishop: As it is not an area of SOCA’s is some evidence of success in how they do that. competence, it would not be right for me to comment, but I am sure that the Home Office would be willing Q24 Mike Gapes: Does that include an active crime to participate in this, if it has not already been asked prevention strategy? to do so. Mark Bishop: As part of the community policing aspect, there will be a crime prevention angle. One Q30 Mike Gapes: A final question from me: what is other additional problem that we have to touch on is being done to combat this problem of cocaine from Brazil’s domestic cocaine problem. They have quite a Brazil’s neighbours—Colombia, Bolivia, Peru or significant one, second in size only to that of the US. wherever? Is there co-operation between the Brazilian Foreign Affairs Committee: Evidence Ev 9
27 April 2011 Mark Bishop authorities and the Governments in those Q34 Mr Ainsworth: It is the majority of our interest. neighbouring states, or is it very much a domestic How would you know? Do you have an office there? effort? How many people have you got there? Mark Bishop: It is a mixture of a number of different Mark Bishop: We have two offices within Brazil and things: it is a domestic effort and it is Brazil engaging we have a relationship with the Brazilian police that regionally with its partners, particularly Bolivia. One goes back the best part of 20 years, both during of the things that we are trying to get Brazil to engage SOCA’s time and previously as Her Majesty’s more on is engagement further afield in locations such Customs and Excise. They are a key partner for us, as Africa, where we think that it can have a real not just in tackling the cocaine that moves to West impact. Certainly, as the Brazilian internal cocaine Africa and Europe, but in the influence that they can problem mounts up or increases, a lot of the Brazilian have regionally and globally. We have engaged with federal police’s focus has gone towards that. As part them on Project SEACOP and Project Ameripol, two of that focus, they realise that they must engage EU-funded initiatives, to try to tie together upstream with their partners, which are Bolivia, intelligence flows in relation to South America and Colombia, Venezuela—a transit country to a certain West Africa. There is a lot of work going on to really extent—and Peru. strengthen that co-operation. We are hopeful of signing a further memorandum of understanding this year with the Justice Minister José Cardozo, about Q31 Mike Gapes: When you say working in Africa, which the Home Office can provide further detail. do you mean that the Brazilian authorities will We have also undertaken a period of upskilling and actually send people from their government capacity building. This isn’t just about our assets on organisations to work in African countries on a the ground; it is about what we can bring to the permanent basis? Brazilian police force. We have facilitated various Mark Bishop: Yes, basically. We are looking to training courses and rummage courses for vessels, encourage them—through things such as EU projects, which have shown immediate results. We have got SEACOP, Ameripol and others that I can go into in them focused on container profiling and port searches more depth—to get much more involved in Africa, by both federal police and the Brazilian customs primarily through the Portuguese-speaking countries. service, with our support. There are undoubtedly issues coming up—the Brazilian federal police’s Q32 Mike Gapes: Angola, perhaps. budget has been cut by some 20%, they have fairly Mark Bishop: Guinea-Bissau is also fairly key, and small numbers, and they are obviously facing Brazil has done some police training, for example, in considerable pressure to tackle the domestic issues in Guinea-Bissau. There’s an organisation called the the run-up to the World Cup and the Olympics. Comunidade dos Países de Língua Portuguesa which is the mechanism largely by which Brazil shifts aid, Q35 Mr Ainsworth: Why is Brazil not a producer and there’s about $4 billion of it every year to Africa. country, when several of its neighbours are? We think that there is scope for that to be much more Mark Bishop: I am not an expert coca grower, I think involved in issues that really affect Africa, such as it is just not the right climate or the right location for drug trafficking. In that CPLP, you have Guinea- it. There are much more conducive atmospheres. Drug Bissau, Equatorial Guinea, which is an observer, trafficking, certainly the production side, as we well Angola, Senegal, which is also an observer, Cape know from our experience in Afghanistan and Verde, Mozambique, Brazil and Portugal. They are all elsewhere, moves towards the area of least resistance key areas for us when it comes to tackling class A when it comes to the level of policing activity. The drugs. most productive outturn you can have in relation to— Mike Gapes: Thank you. That is very helpful. Q36 Mr Ainsworth: Brazil is surely not well policed is it? It is a huge country, with massive areas of Q33 Mr Ainsworth: You have given us a flavour of frontier land. why we are involved in Brazil, and that almost seems Mark Bishop: There is certainly a very large area to to be mainly drugs and associated activities. In big police. I think when you look at Brazilian police, you handfuls, what is that? Is it 80% of our interest there? have to look at capacity to undertake investigations, Is it 50%? Is it the majority? How much of it is drugs? capability to undertake those investigations, and Mark Bishop: If we were to break it down into crime willingness. Those are the criteria that we normally types as they affect the United Kingdom, our primary look at when talking to and engaging with partners. interest in Brazil is the trafficking of class-A drugs. In comparison with other partners around the world, To break it down into percentages is always difficult, the Brazilian police force is certainly a key partner but certainly it is the largest percentage of the number and is well equipped. For example, very few other of of parts that I mentioned at the start, which includes our partners invest in pilotless drones for law things like organised immigration crime and money enforcement activity, as they have done. They have laundering. Cybercrime is a particular area of rising taken possession of three pilotless drones for use in concern—Brazil is in the top ten list of areas of border drug operations, so there is certainly a concern for cybercrime. Yes, if you have to break it willingness to undertake these things. Certainly down into rough proportions, tackling cocaine is geography is going to play its part, because of the certainly the largest proportion. sheer size and scale of the country they have to police. Ev 10 Foreign Affairs Committee: Evidence
27 April 2011 Mark Bishop
Q37 Mr Ainsworth: The Bolivians threw the sexual exploitation of children and the work that has Americans out, and I understand that we are trying been done by CEOP—the Child Exploitation and to encourage the Brazilians to give some help to the Online Protection team—which probably takes us into Bolivians. Why would Brazil be more acceptable to the realms of cybercrime activity. As for the sexual Bolivia than the Americans? exploitation of children, our liaison teams regularly Mark Bishop: There is a certain element of shared receive intelligence from the Brazilian federal police borders and shared interests, and the understanding on internet child pornography, which has been paid that neighbours develop over time. I do not know for and accessed in the United Kingdom. We are the whether one is necessarily more palatable than the bridge between the CEOP investigators and the other, but when it comes to relationship building, the Brazilian police force to take it forward. Bolivians appear to have expressed a preference at the CEOP has said that the relationship works from its moment and the Brazilians should be encouraged to point of view. What would be useful for us is for develop that as much as they can. CEOP and the UK police forces to provide feedback on the intelligence from the Brazilians. We are Q38 Mr Ainsworth: What is their attitude towards working towards that to demonstrate to the Brazilian drugs? Do they have the same regime as there is here federal police—its paedophile unit, in particular—that and in America? Do they believe that the law the UK is serious about tackling the online threat to enforcement stream is the most important element in children, and there have been outcomes from the suppressing the drug trade and that that field needs to intelligence that it has worked so hard to obtain. be chased into the production fields in the way that One of the things on which our liaison team has been Britain certainly buys into? working with CEOP and the Brazilian police is Mark Bishop: I could not comment on how Brazil considering how best to tackle the emerging threat approaches its public health issues or anything else. from the growing numbers of European child-sex That is not for me. As for law enforcement activity, it offenders who will travel to Brazil in the run-up to the is certainly very active, very co-operative and very Olympic Games and the World Cup. We have to have effective, and that works for us. a plan in place with the Brazilians to manage that properly. Q39 Ann Clwyd: You said that you were not an expert on the favela policy, but I understand that parts Q43 Rory Stewart: How do your resources compare of the urban pacification programme are good and with those of the United States, or any of the other parts of it have been criticised by outside bodies. major players, in engaging Brazil? Would it be important for us to visit one of those Mark Bishop: Clearly, our resources are considerably programmes to see how the police deal with law and less than some of our counterpart agencies. The FBI’s order and crack down on drugs? budget last year, for example, was some $7 billion for Mark Bishop: I understand that a visit is scheduled its 14,000 agents. For our 4,000 agents it was for June, in which case I certainly urge you to see considerably less. what our SLO is doing with its respective partners. I am sure that that can be arranged for you. Q44 Rory Stewart: What does that mean in terms of working out how you divvy up work in Brazil with Q40 Ann Clwyd: On the point that you were making other international partners and how you determine about the police, is there any conflict—as there is in how best to punch above your weight? Peru—between the police and the military over Mark Bishop: It means that there is, as with all of our cracking down on drugs? In Peru, for example, the South American offices and a great number of our military seem to have all the resources, while the offices worldwide, a lot of engagement with agencies police do not have enough resources so there is a bit such as the Drug Enforcement Administration to of conflict between them. Have you detected that in determine how best we can come together to share Brazil? some of the burden. It means that we are trying to Mark Bishop: Nothing has been commented on in any encourage more and more of our European partners, way, shape or form by our liaison team there. No. such as the Bundeskriminalamt and the Spanish national police, to take some of the burden and Q41 Ann Clwyd: Do the police co-operate with the contribute financially. It is also largely about how well military? we can access EU funding to try to corral some of Mark Bishop: As far as I am aware, the police in those nations together. The two projects I mentioned Brazil have a number of partners, ranging from the earlier have gone some way towards that. environmental police right the way through. Police Equally, there is a considerable element of working and customs work together. I assume that the military with partner agencies here in the United Kingdom. are on the list of partners, but I cannot say for sure. I The UK Border Agency and Her Majesty’s Revenue know that the Brazilian police engage with a number and Customs both have overseas networks, and we of partners in their activities. have been very effective in getting together and ensuring that things are deconflicted properly and that Q42 Ann Clwyd: Have you had any experience of we are getting the best bang for our buck. the cracking down on child trafficking, which we know goes on in Brazil? Q45 Rory Stewart: Will you give us just one Mark Bishop: Yes. As part of the work that has been example of an area that you might not touch, that undertaken, we can touch on two areas. One is the might not make sense in terms of your resources and Foreign Affairs Committee: Evidence Ev 11
27 April 2011 Mark Bishop that you might leave to a better resourced partner such Q50 Mike Gapes: In addition, presumably, from as the United States? time to time you have people going backwards and Mark Bishop: Certainly when it comes to the forwards. provision of extensive material support or Mark Bishop: Yes, absolutely. contributions, the United States is much better resourced. We tend to focus on the provision of Q51 Mike Gapes: In your priority countries—if you specialist training that can be cascaded outwards and have such a thing—in the region, is Brazil the No. 1 specific smaller projects, rather than some of the country that you work with or does Colombia come bigger plans. In Afghanistan and elsewhere, for up the scale? example, the United States trained the entire border Mark Bishop: Certainly, Colombia comes up the police force. We certainly wouldn’t do that. We would scale. I don’t think we can ever really clarify it just in rely on the United States to commit such resources. terms of a league table, if you like, because as I’ve In the United Kingdom, particularly when it comes to 7 things such as organised immigration crime, we have said for cybercrime, Brazil would be at the top. engaged with UKBA,5 which is very much focused For cocaine trafficking, Colombia would be at the top, on issues related to overstayers here in the United probably followed by Peru and Bolivia, where Kingdom, rather than an organised immigration threat. certainly we are starting to see much more production So there is that dialogue and interchange. taking place.
Q46 Mr Roy: It is unprecedented for a country to be Q52 Mike Gapes: What about for things such as given both the FIFA World Cup and the Olympic money laundering and financial crime? Is that more Games in a two-year period. Presumably the chances concentrated in some of the countries in Central for organised crime will be greatly increased with the America and the Caribbean? many thousands of people from this country who will Mark Bishop: Certainly, we are getting more go to the World Cup. There probably won’t be too concentration of that in locations such as Panama. many from my country, actually, but the chances are There is a threat to the United Kingdom from money that there will be many thousands of people going laundering in Brazil but it is currently assessed to be across for the World Cup. From an organised crime low. We are seeing some evidence of organised crime point of view, it is a dry run for the Olympic Games groups buying property in the north-east of Brazil, in two years later. How have our authorities affected the order to launder the proceeds of their crimes, but debate on what will happen during that two-year Brazil has become less attractive to money launderers period? than it was two to three years ago. As the value of the Mark Bishop: We have already contributed to the pound, the euro and the dollar has diminished, the UK’s assistance to Brazil’s preparations for both those Brazilian real has increased; I think it is about 2.5:1 events. Cyber-security is part of the Olympic security now. strategy. There are lessons that we can impart to the Brazilians on the issues that we’ve picked up on the Olympic Games. We’ve been able to facilitate contact Q53 Mr Watts: You seemed to indicate that Brazil between the Brazilian federal police and its was perhaps at the forefront in Latin America of Metropolitan police counterpart, which is in charge of trying to defeat or frustrate the drug traffickers. Is that policing our Olympics, to try to ensure that as many motivated by its own self-interest? Is there a growing lessons are being learned as possible. I am sure that drug problem in Brazil that is leading it to be so the Metropolitan police will be delighted to provide forthright in its opposition to the trade? further information on Olympic preparations that it Mark Bishop: There is certainly a growing internal has undertaken. consumption problem of cocaine within Brazil. A lot of Brazilian federal police resources, as they will no Q47 Mr Roy: So do we expect large numbers of doubt tell you when you go, have been focused Brazilian authorities to be in London during the towards tackling this. Indeed, they have their own Olympic Games? version of what we tried to do, namely to tackle it Mark Bishop: I understand so, yes. upstream, hence the engagement with Bolivia and others to try and get more towards the source of the Q48 Mike Gapes: In your answer to Rory Stewart problem. you referred to a figure of 4,000 personnel. Can you So yes, as with our relationships worldwide, there is clarify that that is your total SOCA employees? always that element of self-interest, and this is perhaps Mark Bishop: It is. where we get into the realms of this phrase that seems to be doing the rounds about law enforcement Q49 Mike Gapes: How many of those are in Brazil diplomacy. We may not agree with a lot of countries and how many are in Latin America? on territorial, nuclear or other issues, but if you turn Mark Bishop: We have two in Brazil. I would have up as a law enforcement officer and say to just about to come back to you with the total number in Latin any nation, “Would you like to work together on drugs America, unless we can do a quick bit of maths behind and crime?” the answer will be yes. It is one of those me. I wouldn’t imagine it is more than 20, but we can uncontentious areas, if you like. certainly write to you with the exact number.6 7 Note by witness: SOCA does not have a league table or list 5 UK Border Agency. of countries in priority order. Brazil is one of a group of 10 6 See Ev 53. countries of concern in relation to cybercrime. Ev 12 Foreign Affairs Committee: Evidence
27 April 2011 Mark Bishop
Q54 Mr Roy: Isn’t there a danger that the more we as Colombia. Inevitably there is that element of tackle the drugs and the cartels in Colombia, Peru and squeezing a balloon, but it is about being ready for Bolivia, as we get more success we are actually where it pops up next. moving the problem? The problem then moves to a bigger country, such as Brazil. Q55 Mr Roy: But isn’t there a chance that the Mark Bishop: There has been, for example, notable displacement goes east towards Brazil instead of the displacement of the key parts of the cocaine trade western side of South America? Therefore you are from Colombia, and indeed some of the key traffickers opening up the UK as a market. have found the going so hard in Colombia they have Mark Bishop: As we said, there is not really an moved away to other locations. The production of element of direct interaction between Brazil and the cocaine we’ve seen increase in Peru and Bolivia as a UK. For us that has also been about building up what result of this. This, in turn, increases the risk of we do in West Africa and Europe to tackle that domestic trade within Brazil. market. Thus, for example, we have been able to have Success in tackling the drugs trade upstream has made a real impact against Serbian organised criminals, who it more difficult for criminals to operate overall. That’s were bringing cocaine from Brazil into mainland one of the central principles on which we operate. As Europe. From there, some of the points on mainland far as the UK goes, for example, this has been Europe were clearly a hub for onward distribution to evidenced by a sustained low availability for high- the United Kingdom. So if we can have an impact purity cocaine in the United Kingdom since early there, clearly, as the figures show, we are having an 2009, with wholesale per kg prices at an impact on the United Kingdom. unprecedented high. So yes, it does displace it, but we Chair: Mr Bishop, thank you very much indeed. We see real effect, certainly from the UK’s efforts. are going to draw stumps there, and we really Certainly we see real effect with other partners where appreciate your taking the time to come to talk to us. we have invested a lot of time, money and effort, such It was very helpful. Thank you.
Examination of Witnesses
Witnesses: David Norman, Director of Campaigns, and Sandra Charity, Head of Forest Programmes, WWF- UK, gave evidence.
Q56 Chair: Our third panel of witnesses is from the the table, quite explicitly, for a reduction of emissions WWF: David Norman, the Director of Campaigns, against business as usual—36% to 39%. They are very and Sandra Charity, the Head of Forest Programmes. firm targets, and were quite important in moving on I welcome you both and apologise for the delay in the the negotiations. programme. As we are running late, if you don’t mind, The rationale behind that was very much one of we will try to truncate this slightly, but we want to leadership. It was in a sense saying, “We will do this give you a good opportunity to say your bit. The anyway, whatever other countries do.” This is pretty questioning will be led by Rory Stewart. I don’t know important. It already has a pretty clean energy mix, whether you want to make an opening statement. with significant hydropower and biofuel resources. It Should we go straight into questions? has a strong scientific community and forest David Norman: Let’s go straight in. monitoring capacity. As you pointed out, it is already making progress on its Amazon targets. So yes, we Q57 Rory Stewart: Recently there have been some positive statements about Brazil and the environment. are very supportive of that. The Foreign Office stated that Brazil is on track to achieve targets of reducing deforestation by 80%. The Q58 Rory Stewart: Is there another side to this, Council on Foreign Relations says, “Climate change particularly on the Amazon? Is there another side of has become an area where Brazil has turned its clean- the coin? energy and environmental bona fides into a significant Sandra Charity: One issue that has been important, international voice” and that Brazilians are “the most from the years when the Amazon was being cleared environmentally concerned citizens in the world.” very aggressively, is the change in policy—for What would you say about all these positive noises example, much more focus on sustainable timber coming out about Brazilian action on the production. WWF Brazil has launched and is now environment? developing the criteria for sustainability standards for David Norman: The WWF supports that. Our sense some of the main commodities exported by Brazil— is that Brazil is a positive partner in many areas on the environment. Not only does it have a critical set for example, soy—and the Government are working of environmental assets, but it is putting itself on the very much with civil society to address the issues on line in several international forums in trying to make sustainability standards. It is no longer just a focus on, a difference there; perhaps we could come into more “Let’s set up protected areas in the Amazon and have detail on climate change. It is bridging the divide a belt of pristine forest that is untouchable”; it is between the traditional bloc of developing countries, looking at areas of sustainable development where and the G77 and the developed countries. In the they can lead and make a difference. Soy is one Copenhagen climate summit, it put its own targets on current example. Foreign Affairs Committee: Evidence Ev 13
27 April 2011 David Norman and Sandra Charity
Q59 Rory Stewart: Are there things that you think together and try to set clear standards, which is a form the UK or the Foreign Office should be doing to help, of certification that retailers can sign up to, is again a support or in any way facilitate the Brazilian way to make sure that soya that is imported into this government’s efforts? country is not causing deforestation, for example. Sandra Charity: Our experience is that the Foreign Sandra Charity: One thing to add is that the UK can Office has been and is already playing an important continue to play, or play a stronger, role in role. The recent visit by Caroline Spelman to Brazil, encouraging other European countries, given that the about two or three weeks ago, was an example of the UK operates as a bloc in many of the international sorts of things that the Foreign Office can continue to conventions such as the Convention on Biological do. The support that the FCO is going to provide or Diversity and the UNFCCC.8 The UK can play a that DEFRA is going to provide to sustainability and bigger role. Just to go back to the soy example, China biodiversity dialogues in Brazil is going to be is the biggest importer of soy worldwide, but the EU instrumental. That was welcomed by the Brazilian is the second biggest importer, so it is important for Minister of the Environment, and the 48 hours that the UK to continue to work with other importing Caroline Spelman spent in Brasília, which included a countries in the EU to make a difference. If the UK visit to the Cerrado, Brazil’s second-largest and less- or other countries were to reduce consumption or famous biome, were very important for what Brazil is imports of soy, all that soy would still go to China in trying to do. It was very much an invite from the any case, so there is a role for the UK both with the Brazilian government, and I think that is the way to EU, but also working closely with China, which is go. the major pull and the major driver of soy production in Brazil. Q60 Rory Stewart: Broadly speaking, you are confirming the rather positive impression that we are Q61 Mr Ainsworth: We are told that Brazilians are getting of both the Brazilian government’s initiatives told at a very young age that they own the Amazon, on the environment and the UK Government’s so there is a certain prickliness regarding international initiatives on supporting the Brazilian government’s organisations working in Brazil on conservation initiatives on the environment. May I give you an issues. How have you found that? Does that not make opportunity to say whether there are any warning it difficult for organisations such as yours to work in notes, cautions, negative elements or things that push Brazil, or are things getting better? What is the against that narrative that you would like us to be situation with the tension between the international aware of? desire to own the problem of the Amazon and Brazil’s David Norman: We can pick up the soya story in a stated and actual ownership of it? little more detail. Arguably, the link between the UK Sandra Charity: I think that assertion is correct from and Brazil on soya is one of the fundamental some time ago. The military regime has only been out environmental links, so you might be familiar with for 30 years, which, comparatively, is not a very long this. Soya production has doubled globally since the time, and this is something that will take a generation mid-1990s, which is almost entirely about feeding to change. I think Brazilians do like to feel that they change in diets towards greater meat production, so control the Brazilian Amazon and that they have 80% of this soya is going towards feeding livestock, sovereignty over their part of the Amazon, but with particularly chickens and pigs, but also other the economic boom in Brazil, they have become much livestock. This is an explosion, and this is very more open to international interest when it is genuine. important in Brazil. We often witness that through the various It is driving, in particular, the destruction of the international negotiations on things like climate Cerrado. Everyone knows about the Amazon, and the change and the CBD.9 For example, the last CBD existing success of the trajectory in terms of in Nagoya had a strong focus on access and benefit deforestation in the Amazon is already very good and sharing, which is potentially an area of tension, on track to meet Brazil’s own targets, but if you look because, obviously, it includes patents and rights over at the Cerrado, many people have not heard about it. genetic resources and so on, which is an example of When Caroline Spelman shone a spotlight on that where things could get sensitive, but Brazil is playing earlier this month, that was very welcome because a more open game, at least in the view of WWF.10 people do not know of this Brazilian savannah, but We feel that, internationally, Brazil is trying to present it is responsible for about 5% of the entire globe’s itself as having a more modern, more progressive biodiversity. The greenhouse gas emissions caused by angle on the environment. Yes, I think that is the land use change in the Cerrado have now overtaken trend. those of the Amazon. It is not monitored as well as the Amazon, but these are dramatic land use changes, Q62 Mr Ainsworth: You said something about which have biodiversity impacts as well. biofuel possibly being part of Brazil’s policy. Is there It is not straightforward to offer recommendations of not a downside to that? Brazil is the world’s largest what Governments should do differently. This is about producer of sugarcane ethanol, and there must be market action and a change in global diets, but WWF has pressed particularly for recognition that the 8 United Nations Framework Convention on Climate Change. 9 environmental impacts of soya production in Brazil Convention on Biological Diversity. 10 Note by witness: WWF-Brazil is an independent and are absolutely critical. For example, a certification autonomous Brazilian organisation, with a Brazilian Board standard such as the Round Table on Responsible Soy, of Trustees which is recognised by the Brazilian government where producer groups, NGOs and scientists all get as such. Ev 14 Foreign Affairs Committee: Evidence
27 April 2011 David Norman and Sandra Charity some land use and biodiversity issues. There must be I think there is also a partnership role in relation to another side to that, although it might be viewed as forest monitoring. Brazil has very strong scientific broadly positive. community. Part of its success in reducing David Norman: There certainly is a potential deforestation in the Amazon is based on highly downside. WWF’s starting point, if you look at our sophisticated methods for tracking it and responding energy report from the start of this year, is that if you to continued deforestation. Again, that looks like are serious about major emissions reductions globally, technology that can be shared. In regional terms? biofuels are quite an important part of that. We are not Sandra Charity: Brazil is currently the main funder in the camp that says biofuels are inherently a bad of many of the infrastructure projects in other thing. The issue is about setting standards that actually countries, such as roads and dams—possibly more have traction in terms of the social and environmental than the Inter-American Development Bank or the potential impacts. The question is whether biofuels are World Bank, for example. It is already playing a genuinely beneficial in carbon terms. All sorts of strong regional role in promoting development and biofuels, starting with maize-based biofuels in the lending. Importantly from the environmental point of United States, are absolutely not good for the view, it is also keen to incorporate environmental environment: clearly, in terms of full life-cycle carbon standards in its lending policies so as to avoid, let us accounting, they are very bad. WWF in Brazil did a say, the most impacting projects. It is not always all report three years ago that looked at this in terms of rosy. The WWF is working with a number of bilaterals ethanol from Brazilian sugarcane. It found that and the World Bank, so that they and the Brazilian Brazil’s ethanol from sugarcane is probably the most banks are tightening up their sustainability criteria for efficient biofuel on the planet at the moment, which lending. Obviously soya is a big economic driver in is a good starting point, but still, in terms of neighbouring countries such as Bolivia and Paraguay. expansion, there is a need to look very carefully at From the environmental point of view, we are very the social and environmental impacts, particularly the keen to have more of a regional approach. That social impacts. There will be dramatic changes in approach is being promoted by the Brazilian Ministry employment, for example, from traditional family- of the Environment, and it is something that the based farming, which is all year round labour, to current Minister of the Environment has discussed highly seasonal labour, in which jobs are available with Caroline Spelman. only at planting and harvesting times. Let us not worry only about Brazil; we must also think The environmental impacts are exactly as you said. about the other eight countries that share the Amazon There is a potential impact on deforestation, but even basin with Brazil. Although Brazil has 60% of the in the early dramatic expansion of sugarcane, our Amazon basin, there is another 40% covered by the other eight. Taking a regional approach is very much report suggested that this did not have very much something that we would promote, and we would direct deforestation impact. The critical thing, and the encourage this Government and other Governments to most difficult to control, is the displacement effect on do so as well. We feel that Rio+20, which will happen other forms of farming, which can be displaced to in June next year in Rio in Brazil, is an opportunity other forested areas. Yes, it is absolutely essential to to promote this regional approach, rather than a get it right, but we are involved in the development of nationalistic approach on a country-by-country basis. the Round Table on Responsible Biofuels. The point is At the end of the day, biodiversity and forest exactly to do this—to work with industry to set clear conservation and sustainable development depend on standards that are capable of biting, and making sure a more integrated collaborative approach. that when we import those biofuels, we can have As we were saying, there is a lot of South-South confidence that they do not have the negative impacts transfer of technology between Brazil and other that are potentially there, even in Brazil. countries, not in only satellite imagery technology but in other aspects of productivity improvement—of soy, Q63 Mr Watts: You said that Brazil has made a lot for example and other agricultural and commodity- of progress in environmental terms over the last few type economic drivers. years. How much scope is there for it being a force for good among its neighbours? Is that something that Q64 Mike Gapes: You touched in passing on the interests Brazil, or is it completely nationalistic in Copenhagen negotiations and said that Brazil played looking at individual environmental problems? an important role in those. I am interested to know David Norman: On the global stage, it has already how influential Brazil is, given that on foreign policy played a pretty important role. If you look at Brazil, it has a traditionalist, non-interference to other South Africa, India and China in terms of their power countries’ internal affairs approach. I am not going to within the G77 in the climate negotiations, certainly go there, but it abstained in the vote on Libya in the Brazil and perhaps South Africa played a really Security Council, for example. Do you think that that important role in trying to bridge that divide, being is changing on some issues, particularly climate- prepared to say, “We also have a responsibility for related ones, and that that will have a knock-on setting targets, for making emissions reductions”, and consequence, as Brazil sees itself playing a greater putting that on the table up front. That has broken role in the world as a member—temporarily at the through some of the impasse of saying that until the moment, but with aspirations to be a permanent developed world had done everything, nothing was member—of the Security Council? going to be done by the developing world. That has David Norman: That is right. Because of Brazil’s been tremendously helpful. moral authority on deforestation issues and its having Foreign Affairs Committee: Evidence Ev 15
27 April 2011 David Norman and Sandra Charity a pretty clean electricity sector, it is in a position important and WWF’s view is that Brazil, as such a where others are potentially swayed by its arguments. constructive partner, with a track record of spending It is looked up to within the G77, so it already plays that sort of money in a very effective way, proving quite a significant role. that it is delivering global benefits in reducing Also, it is partly down to the creativity of its deforestation and its associated emissions, should negotiators in those UNFCCC negotiations. For certainly be looked at. example, the CDM—the clean development Again, we are at a stage in development mechanism—under Kyoto came out of an idea from internationally where there is still a lot to be worked Brazil—we are going that far back. Because Brazil out. It is critical that that sort of financing also has has been so closely identified from the outset with the some of the safeguards that we touched on in relation climate change issue, in the context of those to biofuels—for example, a naïve approach, focused negotiations, it has already been and continues to be narrowly on carbon, could easily end up incentivising a positive force. That speech by the then President the shift away from natural forests, which are Lula in Copenhagen was critical. He was the first tremendously important not only in carbon terms but person I had seen who had put down an explicit in biodiversity terms, towards plantations. That would statement on the targets. He said, “Brazil hasn’t come be a disaster. This is a word of enthusiasm in terms of here to bargain. These targets don’t need external the potential for Brazil to spend that sort of money money. We will do this with our resources.” That was effectively, and of caution in terms of requiring the pretty powerful because it was very different from kind of standards to make sure that the money is what other major economies were saying at the time. spent well. Sandra Charity: To add a small point, 15Ð20% of Q65 Chair: Thank you very much. You have global greenhouse gas emissions are from exhausted our questions, but do you think that we deforestation. 70% of Brazil’s GHG emissions are have covered everything? from deforestation. That indicates how important it is David Norman: Can we touch on the financing for to address the issue of deforestation, which will also reduced emissions from deforestation and forest manage to address a whole range of biodiversity, degradation, which might be significant? There is a social and economic issues, if the safeguards are in working assumption from the UK that not much place. That is key, and as David said, WWF is money should go to countries such as Brazil that are strongly promoting that at the moment. The UK growing strongly and are emerging economies that Government is still considering the best approach to could be future economic superpowers. There has their financial commitment to addressing climate been quite important small-scale financing from the change, so it is important that a proportion of that FCO on the ground, particularly for bringing together goes for reduced emissions on deforestation and forest different actors such as the Brazilian equivalent of the degradation (REDD). CBI,11 together with different Ministries, but in terms Chair: Excellent. Thank you very much indeed. That of significant funds on REDD,12 this could be is really appreciated. If we have any further questions
11 on the environment after we have been there and Confederation of British Industry. spoken to people, we will come back to you. 12 Reducing Emissions from Deforestation and Forest Degradation. Ev 16 Foreign Affairs Committee: Evidence
Wednesday 11 May 2011
Members present: Richard Ottaway (Chair)
Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Mike Gapes Rory Stewart Andrew Rosindell Mr Dave Watts ______
Witnesses: Nicholas Armour, Director, International Group, UK Trade & Investment, Tony Lamb, Latin Americas Team, International Group, UK Trade & Investment, and Philip Brown, Trade Policy Unit, Department for Business, Innovation and Skills (BIS), gave evidence.
Q66 Chair: I welcome members of the public and higher than we are experiencing in the developed our witnesses today. This is the second evidence world at the moment, so it’s a good place to go to at session of our inquiry into UK-Brazil relations. We a time when other economies are slightly flat. The are looking at the Government’s policy on a strong FCO’s commercial diplomacy programme fund will commercial relationship between the UK and Brazil, allow for a series of projects to be organised in Brazil. and later we will examine the rise of Brazil as an Along with the UKTI strategy announced last night, international actor on the world stage. the Foreign Secretary announced the charter for Our first three witnesses are Nicholas Armour, business that the FCO is launching. It encapsulates the director of the International Group, Tony Lamb from policy over there—I say “over there”, because UKTI UK Trade & Investment, and Philip Brown from the is of course an integral part of both the FCO and Trade Policy Unit at BIS. I welcome all three of you, BIS—that with increasing ministerial visits and and I will open the bowling. The Government say they contact with Ministers from foreign countries across want to increase their exports to Brazil. How will they the board, everyone, whatever their portfolio, should do that? have the latest on what business and what commercial Nicholas Armour: To be perfectly honest, I don’t opportunities we are trying to exploit for UK think the Government will increase exports, but companies with that country so that we can seize British business will do that with as much help as every sensible opportunity to push that. HMG can provide. A new UKTI strategy was launched yesterday evening, which will build on our Q67 Chair: Can any extra help be given? Should we successful track record to help to boost exports to be coaching businesses? Are the ministerial visits Brazil over the years. As you know, Brazil is a useful? You briefly touched on ministerial visits and designated high-growth market for UKTI, and we said that they were altering the culture slightly. The attack those markets through a programme of business Lord Mayor is going. Is that useful? Do you think that activities—in this case, in both the UK and Brazil— to try to get business to take part in the undoubted we are on the right track at the moment? growth in a BRIC country. It is a BRIC for no other Nicholas Armour: I do, for the simple reason that reason than it is a high-growth market. traditionally Latin America has been under-visited by We have a series of high-value opportunities that we significant Britons. If you will allow me a slight have identified from around 60 throughout the world. moment of cynicism, normally a Prime Minister will There are eight in Brazil that we feel are ready for go and declare Latin America to be discovered and systematic exploitation, and where there is a really then that is the last time they can go. That happens good opportunity for UK companies to win significant for very understandable reasons—it is quite a long business. Some of them obviously have a competitive way away. The fact that we have had a fairly sustained interest there. The Petrobras investment programme is programme of ministerial and high-level visits, such of critical importance, and the 2016 Rio Olympics, as yours, over the past two or three years and associated with the 2014 World Cup, present a wide established the Joint Economic and Trade Committee range of business opportunities. back in 2007 to take forward that element shows that We are setting up some virtual project teams to ensure there is a growing commitment. that we extract the maximum benefit for UK It is not enough just to visit, because we have to companies, where UK capability exists to meet the achieve something at the end of it. It is fine, and requirements. We expect an increasing number of Brazilians like receiving visitors, because they ministerial visits to Brazil, and visits from people such understand the importance of it. They understand the as yourselves to build up Brazil as a normal importance of the Foreign Secretary’s Canning House destination for Britons to go to, whether on business speech and putting Latin America there. Latin or not, and to build up a relationship of yes, this is a Americans generally will take heart from the network place where we need to go and to be seen, and in a shift that is putting more resources particularly around funny sort of way to make Brazil fashionable, which the prosperity agenda, which the Foreign Secretary means that it is a place that people go to not just for announced in the House this morning. There is tourism, culture, education and so on, but because it’s demonstrable interest in Latin America, with Brazil a place to do good business. As with all high-growth very much within that, and we must now put the markets, the projected GDP growth is substantially substance there. Foreign Affairs Committee: Evidence Ev 17
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown
Visits like yours tout British excellence not only to be saying the same when he goes to the Foreign attract inward investment, but the excellence of the Affairs Council on Friday—that we need to do a full product that we have to offer and that the country analysis of it. The initial indication is that the beef should be buying. To all intents and purposes, Brazil sector is the biggest area that would be affected. That is a developed nation. It has huge middle-class and means that northern Scotland and Wales are two areas consumer purchasing power that is probably larger that this would affect. The overall initial analysis—as than in the United Kingdom. We jolly well ought to I have said, it is just a preliminary analysis at this be selling into that, at least at the levels that we export point—shows overall net gains across the majority of to the rest of the world. sectors for Europe.
Q68 Chair: As for the Government’s pledge to work Q70 Rory Stewart: Which sectors predominantly? towards an EU and Mercosur free trade agreement, Philip Brown: For the gains? what is the state of play with that at the moment? Rory Stewart: Yes. Nicholas Armour: I will turn to Philip on that, if I Philip Brown: On the agricultural side, we would may. expect it to be the more process side, rather than the Philip Brown: The state of play is that it was raw products, of which the UK is quite a big exporter. relaunched in May last year having been suspended in Scotch whisky— 2004. We have just had the fifth round, but we have Sir Menzies Campbell: That’s a relief. not had a read-out of that yet. Negotiations are not Philip Brown: Yes. Scotch whisky is 25% of food and moving forward that quickly. Normally, a free trade drink exports; it is one of the most effective lobby agreement takes a few years to negotiate. For groups that we speak to. It is very keen on this FTA example, we hope to conclude the India one this year, in terms of the opportunities that it will create for its and it is nearly four years old already, so we cannot members, particularly in the Brazilian market. It will expect progress too quickly. mainly be in industrial sectors, though, that we benefit At the moment, there are a number of sensitivities most. Mercosur and Brazil have very high tariffs— around a trade agreement with the Mercosur region. 10% or 15% on average, and some are as high as 35%. Agriculturally, the EU is incredibly defensive. We see a lot of benefit there. For us, of the main Mercosur is the most competitive exporter in many of exports at the moment, pharmaceuticals is a big one. the most sensitive areas, such as beef, poultry and That will be very good for UK industry. There is some dairy. One of the challenges in the free trade heavy industry as well, and chemicals; they are some agreement is whether the EU itself can come up with of the top export areas. There is also the service a good enough offer. The European Commission has industry. At the moment, we have quite a lot of UK just released a preliminary impact assessment showing investment there. Lloyd’s, for example, is very keen to that some harm would be done to particular sectors in get the playing field levelled on some of the regulatory certain countries, which means that we are at a issues around insurance and reinsurance. We would difficult point in the EU. Because of the appreciation also look for liberalisation and market opportunities of the real and a number of structural issues, Mercosur itself, particularly Brazil, is quite sensitive on the on legal services, accountancy and financial services industrial sector, in particular. There is protectionist more broadly. interest, too. As for the progress of the negotiations, a lot of work Q71 Sir Menzies Campbell: I wonder whether I has been done on the rules. There is already a platform might go back to the generality of the approach. There to build on from where we were in 2004. There has has always been a sort of sense that the Americas fell not been an exchange of offers yet. An exchange of within the backyard of the United States—that is not offers is subject to further EU consideration with very geographically accurate, but it is politically particular concerns from some about the agricultural accurate. As you have described, this is a market of impact. Brazil and the other Mercosur countries need enormous potential. Will we find ourselves, as it were, to go through their own processes. in rivalry with the United States? If so, will there be As for the prospects, the European Commission had any political fallout from that? an aspiration on concluding the Round this year, Nicholas Armour: I will ask Tony Lamb to add which will simply not happen. Realistically, the end anything if he wants to, but I will just say to start with of next year will see a good outcome in concluding that, in my limited experience of dealing with Latin the Round. Once we have a deal that is concluded, we America, and I come relatively fresh to this, the then typically have about another 18 months before further south you go in the hemisphere, the less there the various procedures are gone through and come is a pervasive American culture. Once you get beyond into force. On that basis, I guess that we would be Columbia, it is the case that our European partners, looking at 2014 as a realistic deadline. particularly the Spaniards and so on, are our competitors in investing in those economies. Q69 Rory Stewart: To follow up on that, there will Particularly in Brazil, we really do quite well, largely clearly be advantages for the UK’s economy from the on the back of the oil and gas sectors—the energy free trade agreement, but can you talk a little about the sectors. BG’s investment in pre-sal oil exploration and potential negative impacts on the agricultural sector? so on is the largest such investment in Brazil. There Philip Brown: The preliminary analysis has just come may be limited sectors, but we are quite big in terms out. We have had a look at it, and we have gone back of that. Down that far, the Americans are not too much to the Commission. Our Minister, Edward Davey, will of an issue. Ev 18 Foreign Affairs Committee: Evidence
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown
Tony Lamb: To pick up on that, the Brazilians and Q74 Chair: How many of the UKTI team in Brazil Latin American countries in general are looking more speak Portuguese? and more at opportunities in Europe, and they see Nicholas Armour: Almost all of them, because most opportunities in European markets. BNDES, the of them are locally engaged Brazilians. Certainly, the Brazilian national development bank, opened its first director of UKTI in Brazil is married to a Brazilian. overseas office here in London two years ago, which So is his deputy. His partner is also Brazilian and he will present opportunities for UK companies to invest served in Lisbon before. The head of our team in Rio in Brazil and for Brazilian investment here in the UK. is married to a Brazilian. I do not feel that we will have any major problems with our relationships with the Americans in terms of Q75 Chair: So there are good geographical our expanding trade into Latin America. knowledge and language skills, which is what we are quite keen on in this Committee. Q72 Sir Menzies Campbell: But there will be others Nicholas Armour: Correct. I am fully behind the seeking to capitalise on this emerging economy—I Foreign Secretary’s statement today. suppose you would call it an emergent economy, Chair: Moving on now to the trade relationships. rather than an emerging one. The competition may be Rory. pretty fierce. Nicholas Armour: They used to say that the city in Q76 Rory Stewart: May I begin by following up a little bit? There is obviously enormous benefit to UK the world with the largest number of workers exporters in this free trade agreement, but they are a employed by German firms was São Paulo—that is bit of a threat particularly to things such as the the sort of level; it is ahead of any German city. But, agricultural sector from Brazilian imports. How do then, it is a city of about 23 million. So, yes. We were you, as UKTI, balance anxieties in the UK about hugely big in Latin America; we built the railways Brazilian imports against your own agenda of and all that sort of thing. Then we disinvested promoting UK exports to Brazil? substantially to pay for the Second World War, and Philip Brown: Our starting point for free trade we are now finding our way back. agreements as the UK is that we generally have an Can I add one slight point on Mr Stewart’s question? approach to open markets and we see the benefits of Our top five UK exports to Brazil in 2009, which is both exports and imports. I guess that that is the the year I have the latest figures for, were medical fundamental starting point. Our overall view of what and pharmaceutical products, chemical materials and we want to achieve from our side would be, quite products, iron and steel, organic chemicals, and simply, maximum liberalisation possible as quickly as power-generating machinery and equipment, which possible. Clearly, you do not quite get that. We have supports Philip’s view of the sorts of things that we certain areas that are most important to us, and we are doing. Therefore, we will be happier to see lower push hardest on those. tariffs. Domestically, the European Commission, as I have Philip Brown: Let me quickly add on free trade mentioned, has just launched the preliminary impact agreements from the perspective of where that stands assessment. It also has a sustainable impact with the US. One of the advantages of this particular assessment that looks at a slightly wider set of issues free trade agreement is that no major developed and some development issues. We would look at country, including the US, has an ambitious trade those, and we would want those to be taken into agreement with the Mercosur area. So, this is one of account. On the whole, our approach is that in order the few times where this will give the EU truly to get an ambitious deal there has to be movement preferential access to what is quite a closed market. If from both sides. For example, in the agricultural we can get this one moving, we can get a head start sector, our DEFRA economists are looking at it now. on others there. We will look at the full report and will then make an assessment of the impact and also make an assessment of how that could be mitigated. For example, you can Q73 Chair: How closely are UKTI and the mitigate it over a long liberalisation period, so you get diplomatic staff working on this? How integrated are much more time for adjustment. That is probably the they? optimum way of doing it, because you still liberalise, Nicholas Armour: Totally, I suppose. but you do it over time. You could also look at other Chair: After today’s statement, that is what I would matters; for example, putting in place quotas, which expect you to say. again might restrict the level of impact and mean it is Nicholas Armour: Not only because I joined the easier for the UK Government to manage and, in this diplomatic service 36 and a half years ago and I am case, for farmers or business. still in it, although I run things in UKTI on and off— Chair: Congratulations. Q77 Rory Stewart: Thank you. I suppose the other Nicholas Armour: Thank you very much. There is anxiety about Brazil is that we are at the moment in one other member of my intake left, but three of us another one of these phases of being immensely are dead. I think in London it is rather odd. We are optimistic about the Brazilian economy. In the past all in Whitehall, but with the physical separation of 150 years, there have been many moments when we buildings you end up working in your silos. For most were immensely optimistic. Often that is driven by of us, the experience is that posts overseas are much commodity prices, both in the past 150 years and more integrated than London gives them credit for. indeed if you look at Brazil today. There are elements, Foreign Affairs Committee: Evidence Ev 19
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown despite all the liberalisation and progress, and some sensible money there. Why was that so? It just became warning signs that we have an economy here the place that you had to go. In a way, perhaps that is increasingly dependent on commodity prices. In fact, what Brazil should become, too. Whether it will be were commodity prices lower, they would not be more successful than some of the other markets, I am running a surplus at all; they would be in deficit. They afraid that I do not know. are still running a relatively state-led investment programme right the way across Brazil. Are those Q79 Rory Stewart: Finally, what are you doing to things a concern? Do you have any comments on the promote UK agriculture in Brazil? One of the great structure of the Brazilian economy—what its potential skill sets that we have in the United Kingdom is a downsides are and what risks it potentially faces? highly productive, well-developed agricultural sector. Nicholas Armour: I do not think that any of us, in Some of our competitors—Australia, New Zealand our current jobs, are economists. The Brazilian and the United States—have been very good at economy is booming. Undoubtedly, there are penetrating markets, especially China. What are we opportunities for British companies that we need to doing to make sure that British farmers in the bring to their attention. If our normal global trading agricultural sector are getting in to Brazil and offering rivals are doing successful business there, we should all that we can to promote agriculture in Brazil? be doing so, too. If I understand the implication of Tony Lamb: It is not agricultural, but in 2009 we your question, you are saying that this bonanza may signed an agreement with the International Agri- not last. We are saying not that you must go here Technology Centre and Embrapa, which is the because it will last, but here is something that your Brazilian agricultural institute, so there is a formal competitors are taking advantage of and perhaps you arrangement in place to promote closer relationships ought to be too, particularly as markets elsewhere are within the sector between the UK and Brazilian somewhat flat. In our formal trade talks, there are industry. There is activity in place. always a lot of issues around market access and so on. Nicholas Armour: As Philip said earlier on, we are As I think I have already said, I came to Latin probably better in processed foods, including whisky America relatively late in my career. The one thing and so on. What we find with the high-growth markets that has always struck me is Brazil is almost entire that we are looking at—we structure ourselves unto itself. It does not need the rest of the world. It sectorally to a certain extent and we have our business has agriculture, resources, very sophisticated advisory groups, or whatever they are called under the industrial processes, a large manufacturing base and new strategy—is that business people from the sector the sixth largest aerospace industry—perhaps it is say, “These are the five or six countries in the world fourth largest. If we all disappeared, it could live on where we feel that, with the support of UKTI and the happily, perhaps with a slight cultural loss. It is really Government more generally, we as a sector should be up to us to say, “They are going to go on leading lives making a great push.” We have a list somewhere of the way they are. Let us try to seize the opportunity.” what those are for Brazil, but agriculture is not Traditionally, we are a very entrepreneurial nation. We among them. may not have the language skills, although our staff To the extent that our agricultural sector is not saying there have, but we should be seizing those that Brazil is more important for it than some other opportunities. There is a huge middle-class consumer markets, we therefore tend not to say, “But you’ve base that wants the sorts of things that we offer. As it got it wrong, O agriculture sector.” As you know, the becomes more sophisticated and opens up to the rest Government are very responsive to their business of the world, it will want to be a global player, so let clients about what they want us to support them in us exploit that for what goes with it—the soft power doing. Of course, we will help to lead where we think and the hard sell. they are missing some tricks, but if they say, “No, this is where we want to be,” then fine. Q78 Rory Stewart: What lessons can be learned Philip Brown: From a free trade perspective, the free from how slow the UK has been to move into the trade agreement—if and when it’s concluded—will Brazilian market? It was even relatively slow—2007, eliminate most tariffs on agricultural goods, so the I think—to begin negotiations on trade barriers. opportunity is there. Free trade agreements also deal Nicholas Armour: I don’t know. Would somebody with things such as phyto and cyto-sanitary standards else like to talk while I think of an answer to that so, for example, animal food and animal welfare question? I deal with quite a lot of high-growth standards might also be included in that. Those are markets. I deal with a broad band from Russia, prohibitive—I don’t know the details of them—in through Turkey and the Middle East, Africa and Latin Brazil at the moment. The FTA should help to America and so on. Logically, therefore, I ought to be eliminate those as well. able to compute the lessons to a model that will work successfully almost anywhere, but history and the Q80 Mike Gapes: You mention a number of different world is not like that. Each market is, in many ways, sectors in the economy. Which are the most important sui generis. ones if our Government is to reach the goal of I mentioned earlier on the question of fashion. I have doubling our exports by 2015? found that markets become fashionable—not because Nicholas Armour: I should not have mentioned Government makes them so but because business priority sectors, because I knew that was going to be suddenly decides that this is the place they need to be. the follow-up question. There are myriad bits and China, which is not my patch, was a fashionable pieces of paper, but I don’t actually seem to have a market way before anybody actually made any list of the current ones that we are looking at. I would Ev 20 Foreign Affairs Committee: Evidence
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown say two things: one, to repeat the list of areas where happening with Hong Kong? Is there a similar interest we have the highest number of exports; and also, to from that part of the world or New York? draw attention to the areas that JETCO1 is Nicholas Armour: New York is not too much of a specifically looking at, if I can find the piece of problem; at least, I have not heard of it in that context paper—could you look for it?—which lists the main in Brazil, although others will correct me if I have workstreams. got that wrong. The preoccupation for Brazil vis-à-vis At the moment, the focus is very much on the China is much more about competition for industrial infrastructure requirements that both the Olympic goods. Part of the reason why I think it has been quite Games and the World Cup are going to bring, not just difficult to get the FTA sorted out is that they are very with getting the stadiums built, but the huge worried about what happens if China is able to flood requirement for airports, the security aspects, the the Brazilian market with their cheaper industrial power that they will need and all that goes with that— goods and so on. To the extent to which Brazil now the whole aspect of upgrading Brazil’s infrastructure relies on purchases of its raw materials by China, it is to meet the requirements expected of Games in the building up a trade relationship with which the 21st Century. Did you find that list? Brazilians do not seem entirely comfortable, as it is Tony Lamb: To add to Nicholas’ point in terms of the priority sectors, obviously energy is a top priority. quite a dominating one. I think that is another reason Nicholas mentioned earlier the pre-salt finds that were why they are also looking to aim off a bit by discovered just off the coast of Brazil. Certainly, developing their relationship with the EU. companies such as BG and Shell are looking at opportunities, so there are opportunities for those Q83 Mike Gapes: Can I take you back to the companies and others in the energy sector. question of how British business can benefit? What Infrastructure, energy and in and around education as about small and medium enterprises? We have been well are the areas, plus of course financial services, told that there is a lot of success in Brazil based on which we will see more and more of with the Lord personal contacts. Given that British small and Mayor’s visit next month. medium enterprises will inevitably be limited in what they can do at that level, how can they be assisted by Q81 Mike Gapes: On that point about the City of yourselves or others to get into the Brazilian market? London, is that particularly important and what are Nicholas Armour: The short answer is: with you doing to promote that relationship following the difficulty, largely, because of its distance and cost. Lord Mayor’s visit that you have referred to? Given Distance also involves opportunity cost. The longer London’s global role, how big is that in Brazil at the answer is that, particularly under the new UKTI moment and how much bigger can it get? strategy launched yesterday and given that the focus Nicholas Armour: HSBC, for example, has a huge of our current Minister for Trade and Investment, operation in Brazil. It is one of its largest and most Stephen Green, is very much on the importance of profitable in the world, so it is there. We have SMEs to the health of the UK economy, they are mentioned before that BNDES chose to set up its first fundamental to ensuring that we remain able to pay other hemisphere operation here in London. our way in the world. That is the message that he BOVESPA, its stock exchange, has also set up here repeats regularly everywhere. We know that SMEs as well, so links are developing. President Lula was that export, by necessity become more competitive. here a couple of times over the last 12 to 18 months, largely in the City, pushing that sort of thing. The Therefore, they are more robust and healthier; Lord Mayor is going, as we know, and will take with therefore, they last longer. SMEs that do not export him a range of people in the legal, insurance and have a much higher incidence of dying. SMEs are financial services—the sorts of companies that go with critical. Lord Mayors. What does that mean in terms of Brazil, which is a There is so much wealth in Brazil that it is long way away? It is great if part of a supply chain inconceivable that TheCityUK—which, as you know, leads into some of these big infrastructure projects. It is set up as a trade association for financial and related is great if a bespoke-type company has a niche services in the UK—should not be exploiting that to operation that Brazilians need or want. I just throw in the best of its ability. Sorry to sound a little incoherent some circumstantial evidence. We always knock on that, but it is so important that there is a separate ourselves for our inability to speak foreign languages financial sector group that keeps an eye on that. I and so on. That is why we have difficulty selling know they are doing that, and that is why the details around the world. Somebody—an unproven—pointed are not quite at my fingertips. out to me that in fact our SMEs are marginally better Tony Lamb: And Lloyd’s of London has its Brazilian than some of our bigger companies, because they tend office up and running, which is a recent establishment to go to countries where they have that personal link: as well. That is another sign of opportunities for the they have married a Brazilian, or they have been on City. holiday there and met somebody drinking in a bar. “What do you do?” That is how they set up the Q82 Mike Gapes: Are other countries competitors in relationship as an SME. It often starts from that very this and trying equally hard, or does London’s global personal relationship, rather than in some of the big role mean that people look to us first? What is companies, which say, “I have a product; I’m going happening with Shanghai, for example? What is to come and try to establish a personal relationship on 1 Joint Economic and Trade Committee. the back of that.” Foreign Affairs Committee: Evidence Ev 21
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown
Philip Brown: Let me give an example from another things, and it has been built on time and within free trade agreement that we concluded recently, budget. Is there any sense that we are trying to sell to which will go live in July. It is the Korea FTA. the Brazilian Olympic authorities the expertise that The UKTI, along with BIS, produced a report—I went behind it? think it was called “100 Business Opportunities for Nicholas Armour: Very definitely. We have various UK Business”. In simple terms, it illustrates what it host-to-host agreements, and that seems to be the would mean in terms of new opportunities, reduced format that we had with the British Columbia tariffs and opportunities to invest in other sectors. It government for the Vancouver Winter Olympics, with was quite a big launch. It was very much aimed at the Russians for the Sochi Winter Olympics and with SMEs, because you tend to find that the big the Brazilians for the Rio Olympics and so on. companies—for example, in Brazil you have We are also trying out a new sort of project-focused something like £4 billion of investment in the financial services sector—can often find ways around approach in Brazil. There is a laissez-faire attitude in the regulations, whereas SMEs find it more difficult. the British approach to business; everybody piles in That is a practical example of what we can do. and sees what business they can gain. This time round, we are trying to be a little more organised, particularly Q84 Mike Gapes: We have also been told about the in the way that companies call on our services in- buy Brazilian policy from the Brazilian government country. They say to themselves, “Hey, hang on a bit. with regard to the oil industry. What is your reaction There is a mission being organised, by whomever, the to that? What is UKTI’s approach? Are you going month after next. Why not be part of that?” It is about with the grain, or against it? looking at specific things. We do not think that “come Nicholas Armour: Both—[Laughter.] If you want to tomorrow without any preparation” is a good idea. We get across the stream to the other side and it’s fast- are trying to give that sort of steer to companies flowing, you go with the stream and edge across. looking to win business so that it becomes more There will be certain things for which you go with the coherent. We are moderately confident. The Brazilians flow at any given moment, because that is the way to tell us that they would much prefer that approach, do it. However, we have regular opportunities to speak rather than a whole host of people all trying to call on to the Brazilians, whether in the course of normal a few key officials in an unstructured way. business through the ambassadors or on business with In particular, we are also looking at ways for what Ministers or JETCO. We may say, “You do realise that we call the technocratic element, where we want to this particular issue is counter to your undertakings strengthen the UK’s positioning in offering things by with WTO2 or whatever it is. You do realise that offering direct knowledge transfer. We have already you are holding up British interests in doing business started doing that on the whole question of the in your country; you say you want it”—and this, that and the other. There are opportunities to keep sustainability agenda around the London games. Our hammering away and we hope to slow the flow of organisers are talking to their organisers, and their contradictory and harmful currents. head, Henrique Meirelles, is coming in a couple of months to see what more they can learn from that. It Q85 Mike Gapes: What about British companies co- is collaborating selling. The technocratic experience operating in partnership with Brazilian companies as of “We know what we’re doing, this is how you did a best way to deal with the problem? it, and these are the companies who did it for us and Nicholas Armour: If that is what the business decides can do it for you” tries to bring all that together in a is the best way to deal with it, fantastic. Partnerships whole—I did not want to use the word “holistic”, but tend to work better in life. I may have to—sort of way.
Q86 Mike Gapes: One of our witnesses said that that Q89 Sir Menzies Campbell: In that regard, are you was the way forward. Do you encourage that? satisfied with the co-operation that you are getting Nicholas Armour: Yes, absolutely. Part of UKTI’s from the Olympic authorities in this country? services is to help companies to find suitable trade Nicholas Armour: Yes is the short answer. We can all partners. be better human beings and can always have better Q87 Sir Menzies Campbell: I wanted to ask about co-operation, but, given that they are trying to run the the opportunities provided by the Olympic Games and Olympics in just over a year’s time, they understand the World Cup, but to a large extent you have the importance of that and it is a collaboration that answered me, given your emphasis on infrastructure. works. Nicholas Armour: I have a huge list of things that I could read out if you want. Q90 Mr Watts: Can I push you further on the partnerships? One of the problems that small and Q88 Sir Menzies Campbell: They are quite good at medium-sized companies will undoubtedly have is the building stadiums, though. I think that Brazil has the distance between those and the time to build up largest football stadium in the world. I suppose that networks and contacts, if you can find partners where we have a good advertisement—a good shop they can use their networks and sales teams and so window—because our infrastructure is specifically on. How many partnerships have you built up over the designed for the games rather than transport or other past 12 months? Can you give us some indication? 2 World Trade Organization. You say that it is one of your priorities. Ev 22 Foreign Affairs Committee: Evidence
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown
Nicholas Armour: I am sure that we could find some investments that have been made. What I want the figures that we could send to you.3 How reliable Brazilians to do is to buy the products of British they would be, I don’t know. Companies will come to companies, preferably at a profit for those British us and will want their hands held right up to the altar companies. Of course, we are trying to attract inward and when the ring is put on the finger. Others will investment, too. I fully accept that as part of selling need, “There’s a church and there’s a good verger to you will need to set up partnerships and local talk to,” and they then say, “Thank you very much,” manufacturing, but my aim is to make British and that is the last we hear from them until we see in companies as profitable as possible by selling fine the equivalent of Hello! magazine that it has been a British products, goods and services. successful marriage. There is a whole range of ways As you identified, there are a number of issues, in which one gets involved, so to get the actual figures particularly in Brazil. The formal process for dealing would be difficult. with the Brazilians on that is through the Joint This is Tony’s patch, so I will let him say something Economic & Trade Committee, which has met once a in a moment, but what I would say is that, around the year since 2007. Dr Cable went over at the end of project approach we are taking to the Olympics, August last year with a delegation. We are expecting smaller companies that have been supplying into the the Brazilian Development, Industry and Foreign Olympics here really need, probably, to look at going Trade Minister to come back in early September. The with the sorts of people whom they were working with mechanisms that we have are the major trade here and go with them working in Brazil. That sort of agreements, which Philip has touched on. If it is a thing will open the wider door and then the smaller trade policy issue, we have the pressure that we can SMEs will come in as part of, I suppose, the supply put on the Brazilians to address market access chain. concerns that companies raise with us through the EU Tony Lamb: It does not quite answer the question, but and our bilateral mechanisms. We are also willing to in the period between 2006 and 2009, we saw a 500% offer advice to individual companies and to support increase in the number of inquiries being fielded by them as necessary and as appropriate in lobbying on our colleagues in the UKTI network in Brazil. In specific issues that they may have. As part of the many respects, they would have led to some Foreign Office’s Prosperity agenda, we are looking at relationships. It underlines the attention that is now a wider way of helping the Brazilians to build up their being focused on Brazil by companies—large ones capabilities and capacity in running efficient and and SMEs—here in the UK. effective customs regulatory regimes and the like, which will make Brazil an easier country and Q91 Mr Watts: Could you send us any details that marketplace with which to deal. By definition, that you have? If you are saying that it is a priority and will make it easier for UK companies. Does that that it is something that needs to be attended to, it answer your question? would be nice to have some information to give us an indication of whether the numbers increasing tell us Q93 Andrew Rosindell: It does. Tell me how you that you are being successful or whether there needs feel about Brazil as a country. Is it a safe place to do to be a bit more of a push in some areas. business with, not only in terms of the stability of Tony Lamb: Sure. the country—it is a stable country—but in terms of corruption? There is a degree of corruption in the Q92 Andrew Rosindell: Obviously, Brazil is a great country still. How are we helping and advising British opportunity for British business to trade and to work businesses in that sense? with in the future, but, of course, British business Nicholas Armour: I will take the macro bit to start needs to have opportunities that do not pose and I hope that the others will join, if they want to. complications. Therefore, businesses need an easy The last presidential election was the first for a long way in and they do not want to be bound up in time where whoever won the election was not going bureaucracy and regulations that prevent business to lead to a huge dip or rise in the economy. To that from flourishing. They also need Governments who extent, Brazil, which always had a fantastic future, has are co-operative, as well as security of investment. finally reached that future. The economic and political What are we doing to encourage the Brazilian stability seems to be there. government to get their act together and ensure that British business feels confident to invest in Brazil? If Corruption is a difficult issue. It affects a large number we cannot do that and are not succeeding in that way, of markets in which our companies do successful how are we helping British business to get around business. We hope that they manage to stay the right some of these issues? side of the Bribery Act. Those who deal with Nicholas Armour: Let me clarify one point. I am not countries where there is a reputation for corruption working hard to encourage British companies to invest need to tread warily. We are happy, as part of UKTI in Brazil. I am delighted that they do so if it is part of trade services and with the FCO’s general advice, to making them a healthy company, and of course the discuss with companies what that may mean in their Government will work terribly hard to protect particular circumstances. There is an Overseas Security Information for Business website, which 3 Note by witness: SME figures, during the period 01/04/2010 gives access to the sorts of issues that companies and 31/03/2011: 790 companies were offered Service might face, not only on the bribery and corruption Deliveries by post. The companies cover a range of sectors, notably Healthcare & Medical, Global Sports Projects, Oil & side, but on the security side more generally as well. Gas, Education & Training and Construction. Those are the things that businesses need to be aware Foreign Affairs Committee: Evidence Ev 23
11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown of before they embark. That is the service we offer on the satisfaction in the job. I hope that you find your the web. It is a difficult issue. visit useful and that it adds to the access British companies will get. Q94 Chair: Thank you all very much. I am afraid we Chair: We are much looking forward to it. Thank you have to move on. Thank you for the efforts you are for coming along and briefing us on what is going on. making on behalf of Great Britain. Nicholas Armour: Not at all. Let’s just hope that British companies make the best of it, because that is
Examination of Witnesses
Witnesses: Professor Andrew Hurrell, Montague Burton Professor of International Relations, University of Oxford, and Dr Marieke Riethof, Lecturer in Latin American Politics, Institute of Latin American Studies, University of Liverpool, gave evidence.
Chair: The second part of this session is about Brazil perhaps underplaying, for example, the extent to on the international stage. I am delighted to welcome which Brazilian activism had been growing. In the Professor Andrew Hurrell from Balliol College, 1990s, it was developing as a major player in, say, the Oxford, and Dr Marieke Riethof from the University dispute settlement mechanism of the WTO. That is of Liverpool. Have I pronounced that right? one side. Dr Riethof: Yes. Secondly, there has been huge ignorance about Brazil in many places—the United States as well as Europe. Q95 Chair: A warm welcome to you both. If it does not come from nowhere, it comes against a Apparently the witnesses had not met each other until backdrop of patchy knowledge of Brazil. An earlier today, so it is not a co-ordinated response. witness talked about making Brazil fashionable. Let me open the bowling by asking, how important a Brazil has become much more fashionable in culture, player is Brazil on the world stage? Is it becoming media and music, but in terms of knowledge, media increasingly influential? presence and exposure, and academic time and Dr Riethof: Brazil is a growing and booming attention, there is much less certainty. The last area economy, as was discussed in the previous session, so studies rethink in UK higher education left out Latin I will not elaborate too much on that. Apart from the America. Within Latin America, there is always a economic importance of Brazil, it is also a regional question about where Brazil fits. So we have a big and international player. Regionally, it is problem in terms of what we know and the number of strengthening relations with neighbouring countries people who have a knowledge about Brazil. and promoting regional integration, not just Those are the points I would make about where we economically but politically. It uses that regional have come from. Obviously, there are the areas we integration to promote its own global role. have just heard about—those areas where Brazil has Globally, Brazil’s economic importance is crucial, but now come on to the stage as a very dynamic player. it is trying in various other ways to establish its It is active and in many areas it is what one might call international reputation. In part, that happens through a veto player; things cannot happen without it. Real Brazil’s focus on multilateralism. It prefers to conduct questions regarding where it is going and how much global policies through multilateral organisations like it has achieved are very live issues. the UN. It also has an extensive range of relations— formal and informal—with countries around the Q96 Chair: Their approach on the world stage has world. In that sense, Brazil’s foreign policy is focused been to economically act right, but to talk left on the on establishing and strengthening south-south international stage in order to satisfy the nationalistic relations in various regions. It is building on relations base. Do you think that sort of approach will with developed countries—the US, European continue? Where do you think they will be 10 to 15 countries and Japan—while strengthening its regional years from now? importance, using that together with its global role to Professor Hurrell: Brazil has been going through a promote its international foreign policies. period in which many things have been very positive. Professor Hurrell: I would add a few points about There has been a very benign external environment. how we have come to see Brazil. For some people, Economically, there was the rise of China, lots of Brazil has come out, not of nowhere, but has emerged credit pouring out of the United States, and countries very suddenly. There are a number of aspects to that. through the early 2000s buying Brazilian A previous witness talked about Brazil as a country manufactured goods. Politically, Brazil could exploit closed unto itself. There has been a long tradition of a world in which, looking around at, say, the WTO, Brazil being quite inwardly focused and tied to a many people thought, “We can’t really run this any foreign policy that has traditionally been quite low- more. It’s just a rich man’s club. We need more key, reticent and pragmatic. The move into the years players coming in.” Brazil was able to play upon that of President Lula—this very activist, personalist, perceived need for more participation and legitimacy. voluntarist and ambitious foreign policy—is a It has been a benign environment for the region. The dramatic move, and it affects how we see Brazil, United States has not really been engaged. There has Ev 24 Foreign Affairs Committee: Evidence
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof been a space. We could talk more about the backyard out of relations with China. I was in New York all last question, but over the recent period there has clearly year and heard lots of language accusing Brazil, such been, if you like, room for Brazil. So we have been as, “Brazil is an adolescent, it hasn’t really learned to through a period where many things have gone well. grow up, it’s got power but it doesn’t know how to Economically, the great political success of the Lula use it.” years, to which I think your question directly alludes, Of course, the response on the Brazilian side is, “Well, was being able to combine macro-economic but what is responsibility? Climate change—you’re orthodoxy—in a sense, a continuation of many of the still the great irresponsible.” So there is this debate, themes of liberalisation—with, first, social and it’s getting used to navigating in that world, rather programmes to broaden the political base, and then, than in a world in which there is a potentially simple more recently, a re-engagement with aspects of a more process of entry, that I think is the biggest challenge. statist, nationalist economic policy. It is that blend which has, externally, enabled Brazil to talk to Davos Q98 Sir Menzies Campbell: To some extent you and the World Economic Forum, but also to the World have anticipated and answered my question. Status Social Forum in Porto Alegre. Those two sides have equals influence, but this carries with it responsibility. gone together. One of the things we need to think Do you detect any political change within Brazil about, going forward, is whether many aspects of that which understands that? Has the change in the benign environment, and that great success in presidency had any impact upon that idea? I know that combining different aspects domestically, is going to there will be some specific questions about meet greater challenges. international institutions and the Security Council. Dr Riethof: To elaborate on the point you mentioned Without delving into too much detail at the moment, about the role of the US in the region and what it do you detect any understanding that if you play a means for Brazilian foreign policy, I would stress that more important part in international institutions, you Brazil likes to conduct autonomous foreign policy as are expected not just to use your influence but to much as possible. It likes independence, or not demonstrate your responsibility? necessarily being dominated by the US. That is a Dr Riethof: First, on the possibility of change in driving force in the regional context and Brazil with the new presidency, I would say that there internationally. But that does not necessarily mean is a lot of continuity between President Lula and that there are not positive relations between the US President Dilma Rousseff, so there is continuity in the and Brazil, which we can discuss further. foreign affairs team. There is also continuity of I also want to stress that there is not necessarily a priorities, in developing the global role of Brazil contradiction between Brazil’s state-led development through multilateral institutions and also through policies, its progressive social policies and its position Brazil’s economic and unitarian role in the world, and on the international stage. There is a combination continuing to develop and strengthen relations with between promoting free trade and the market neighbouring countries. There are a few small economy, and promoting the other policies. differences. First, President Dilma Rousseff seems less likely to take very controversial stances in Q97 Chair: Do you think we need to adapt our international politics than President Lula. She also approach to the rise of Brazil as a major global power, seems to emphasise human rights a lot more. That is or are we on the right track? from the first five months of her presidency. Professor Hurrell: It’s not so much a matter of the “right track”; I think it’s a matter of reading where we Q99 Chair: Do you believe her on human rights? think we are, and there are numerous “we’s” involved Dr Riethof: There is always a mix of symbolic policy in that. In the 1990s it seemed very clear: there was a and real policy. In her case, there is a personal coherent, developed, successful West led by the motivation to support human rights. United States. Many of the prescriptions, political and Professor Hurrell: That is right. In a number of areas economic, seemed very clear. So it was a matter of one can see an active realisation about ongoing bringing emerging powers from countries like Brazil engagement, particularly when the thing you are on board, socialising them and integrating them. What engaging with is changing. I think climate change is we have to get used to is a changing world in a more a very good example. Through the nine months before dramatic way, because the notion that the West has the and up to Copenhagen we saw a lot of movement answers, that its institutions work, which was already inside Brazil as well as in terms of positions outside. eroding, has come under much more sustained Human rights is another very interesting one. There challenge through the financial crisis and a whole was a tendency to play what one might call hardball series of other factors. with human rights through some of the Lula years—a I think the big change is getting used to a world in justifiable critique: “You’re selective”, “You’re which these are new partners. They are there round messing around with the human rights regime”, the table. It is not clear that anybody has a capacity “We’re rising”, and those sorts of ideas, and then to dictate who is at the table, or what the conditions clearly a pull-back, whether it was instrumental or are. That is one of the messages of the G20. So there more than just, that, “Yes, there are certain principles, is a very different kind of relationship—who sets the we are a democracy, we want to be a liberal country agenda? We see that in terms of debates about the and we recognise that these are important norms.” agenda and about responsibility—who is being a responsible great power? With the United States there Q100 Rory Stewart: We can see a curious picture of is the idea of being responsible stakeholders, growing Brazilian action in foreign affairs. There sometimes Foreign Affairs Committee: Evidence Ev 25
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof may be inaction in relation to countries such as to maybe 2004 or so, there is a return to a view that Pakistan and Afghanistan, sometimes unhelpful the control of our own indigenous nuclear technology, political action in relation to Cuba or Venezuela and and particularly the enrichment technology that Brazil sometimes eccentric action in relation to Iran, but is had developed and wants to develop on an industrial there any coherent, original philosophy behind that? scale for exclusively peaceful purposes, is an Is there a Brazilian narrative that they are presenting? important part of our national project. I think that that Is there an intellectual or cultural energy saying, “This is very clear. The dominant, overwhelming theme of is Brazil’s vision of the world order”? government policy has been not only that it is for Professor Hurrell: I’m a little bit of a sceptic about those purposes, but that Brazil clearly upholds giving too much attention to any country’s grand external safeguards in what it does. There are issues strategies, but it is possible to identify a set of with centrifuges in energy plants, and there are understandings about the world. For many of those ongoing issues with Brazil’s reluctance to agree to the associated with Brazilian foreign policy, the reason Additional Protocol, or anything like it. Yes, there why they are confident that they have some of these have been statements by people in Brazil—sometimes things right is that they have been more right than official, sometimes semi-official—stating that Brazil wrong about how power is defusing and about the shouldn’t have signed the NPT4 and that it should role of emerging countries and the need to reorientate maintain a control of nuclear technology such that, in themselves to that. They see themselves as being right the future, it would give rise to different sorts of in terms of the centrality of what we used to call options. That language has grown up, but it is very north-south relations. There is a south-south policy, much outside of official policy. which obviously has self-interested, instrumental For me, characterising what we have seen in the goals, but also has a set of normative moral claims. nuclear area, there is very much a re-emergence After all, President Lula has pressed arguments about within the so-called “nuclear renaissance”, which may hunger, money, transfer taxes and raising resources, be ending now with Japan, of the idea of “our so there is a clear narrative there, which is about technology, our development for our economic interests and values. purposes, industrial purposes, commercial purposes Even in some of the, what you term, “controversial” and energy purposes”. That is the thrust of where policies—the idea that Brazil, and we may talk more Brazil has been going. about the region, has a role in helping to manage and mitigate some of the more obvious deep-rooted Q102 Mr Roy: So the bottom line is no nuclear regional problems that everyone recognises and some weapons? of the problems that others, particularly the US, Professor Hurrell: It has always been very hard to recognise, say in relation to Cuba and Venezuela—its imagine what would be the real driver. There is a great policy is clearly seen as part of a narrative about what debate about what drives states to acquire nuclear Brazil can do. That is not about the great, grand weapons. In the 1970s there was a latent nuclear provisions of some new global order, but important rivalry with Argentina, not at the weaponisation level, provisions of active diplomacy and responsibility in but at the level of development. One of the great its region. There is a narrative, but how much one achievements of regional security in Latin America can fit everything into a single grand strategy for any was the rapprochement and the stabilising of that country is a slightly open question. relationship, which is still a stable security relationship. Q101 Mr Roy: We know that Brazil has signed So what do we have? We have a potential that that treaties and that the Brazilian constitution states that relationship might unravel. Some of the Brazilian nuclear activity is for peaceful means only. What are language is making Argentina think a little more your thoughts in relation to whether Brazil will want cautiously about the future, but there is still nothing to have or have a nuclear weapon? I would also like that really represents a threat of unravelling. We have your thoughts on Brazil’s role in relation to non- status drivers, and surely the focus on technology such proliferation and its role in that debate. as nuclear-propelled submarines has both a defence Professor Hurrell: Again, it is an area of change. Just rationale and a status rationale. to be very quick, Brazil’s interest in nuclear policy More broadly, Brazil wants to be a player in a goes right back to the ’50s. This was a phase that led reformed nuclear order. But it is very difficult to see through to 1975 and the West German-Brazil what might be the direct pressures,5 which one can agreement, which was the largest transfer of nuclear see in other parts of the world, that could come back technology ever to a developing country. That did not to push Brazil in that direction. work out hugely well, both scientifically and technologically and in incurring bad relations with the Q103 Mike Gapes: May I take you a step further on US. From the late ’70s to the late ’80s there was the that? Would you say that what has been characterised so-called “parallel nuclear programme” developing by some people as a cosying up between Lula and indigenous enrichment technology. Ahmadinejad was a personal initiative of Lula’s? Or The following decade was one in which Brazil was does it reflect the deep-seated view that countries have very much in favour of joining international regimes. a right to enrich uranium and to have a national policy, That is the decade of the process that led to Brazil’s 4 Nuclear Non-Proliferation Treaty. adhesion to the non-proliferation treaty in 1998—the 5 Note by witness: that is, direct pressures to acquire nuclear coming onboard. There is a change—a discernable weapons of the kind that one can see in other parts of the change—in tone, in the sense that by the time we get world. Ev 26 Foreign Affairs Committee: Evidence
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof and, even if they are signatories to the non- conflict, where it would not be necessary for the proliferation treaty, they shouldn’t be treated unjustly? Security Council to impose sanctions. The arguments I have had with Iranians about not signing additional protocols are, “It is an intrusion, Q106 Mike Gapes: What about the aspiration to be and we are not developing nuclear weapons,” and so a permanent member of the Security Council? Is that on. Do you think that Lula really believed that? widely supported in the country? Do people recognise Professor Hurrell: I don’t know, and we don’t know. that it brings great obligations as well as status? The motivations may be in the archives and, in Would Brazilian society generally, and the Brazilian however many years, we will know more about the polity, be prepared to accept the responsibilities that individual motivations. Interestingly, of course, Lula’s come with being a permanent member? policy generated this enormous debate and Dr Riethof: Support for a major Brazilian role controversy inside Brazil about whether it was a good domestically is very considerable, so the international thing or a bad thing—relations with Washington, reputation of Brazil and foreign policy is a major human rights, and all of that. domestic policy issue in presidential campaigns. Of There was, above and beyond the specifics of Lula, a course, as you say, that kind of role in the Security sense of a nuclear regime that, for many people, had Council would require investment and potentially also been used selectively to reflect particular countries’ participation in sanctions. If we look at the regional interests, but there is a right of indigenous enrichment context, Brazil is involved in conflict mediation and of legal indigenous technology. Those are quite through the regional structure of the Union of South broadly shared views of “the nuclear order”. There is American Nations, but I am not entirely sure whether a view in Brazil, including within parts of the military, that translates into a recognition of the responsibilities that Brazil had been a good player in the 1990s. It in the Security Council. signed the NPT. Professor Hurrell: The aspiration is a very, very long- What happens? Look at India. India is a player that standing one. There were debates over Brazil leaving plays hardball with the nuclear order and gets the League of Nations in 1926 and debates in the rewarded. So you have that view, which, again, is not 1940s when Brazil was on Roosevelt’s possible active the official government view. Those ideas are there list as a permanent member. How much of a direct priority it is for Brazil has gone up and down, and it and will stay there, over and above the debates about has come back clearly in recent years as a very major whether the engagement with Lula was a good or bad priority. Obviously, as you say, Brazil is towards the thing for Brazil and for the world—normatively or sovereignty end of the spectrum, although there has whatever it might be. been quite a lot of movement towards ideas not of non-intervention but of non-indifference about what Q104 Mike Gapes: Can I switch the focus? You have happens,6 so there has been movement there. There both referred to the fact that Brazil sees itself as a is a big debate, though, about what the responsibility growing important player in the world. At the of a permanent member actually involves. It clearly moment, it is a non-permanent member of the Security involves activities in peace and security, which is part Council. As such, it did not vote the same way as the and parcel of how Brazil has seen its major role in other non-permanent member, South Africa, on UN Haiti. Resolution 1973 with regard to Libya, but in Does it always necessarily involve enforcement? Yes, abstaining it voted the same way as India. Where in perhaps, but there is another argument that says that this spectrum does Brazil stand? Is it emotionally and the role of a broader membership could well be in intellectually with the traditionalist, non- providing other assets of this mediation kind and other interventionist view on foreign policy, or did it just important assets in terms of representation. So I think feel that it could not support intervention at this stage? the Brazilian view would be to press a broader debate Dr Riethof: It is more of an expression of Brazil’s about what “the responsibilities” of permanent traditional rejection of intervention along the lines that membership are, but—you are right to suggest—with were proposed in the resolution. Brazil does support a creeping recognition that there are points where, if humanitarian missions in other fields, so I don’t think you like, the rubber hits the road and hard decisions it’s necessarily a case of Brazil seeing it as its future have to be taken. role to support these kind of interventions. Brazil is Is there broad support? Yes, there is much more probably likely to be more in the non-interventionist interest in foreign policy domestically. There is much camp, in that sense. more support for an active foreign policy. There is much more domestic contestation about things like Q105 Mike Gapes: Does it see this as being an Brazil’s Iranian policy. Would that translate into a impediment to its taking on a leading role globally in high-risk foreign policy in terms of active global security, or does it think that it still wants to be interventionist policies? I think we have still got quite a permanent member of the Security Council and so a long way to go there. change the way that the world is shaped? Dr Riethof: Brazil sees its role as more in mediation Q107 Mike Gapes: What attitude should the UK in international conflicts than in intervention, although have to Brazil’s aspiration to be a permanent member whether that is always realistic is a different question. of the Security Council? The British Government support Brazil’s bid, along with several others, but Going back to the Brazil-Iran situation, that was an that is always in the context of a complete reform of attempt by Brazil to prove that it was capable of mediating and negotiating a major international 6 Note by witness: (inside other countries). Foreign Affairs Committee: Evidence Ev 27
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof the Security Council, which is not going to happen. that, perhaps you could refer back to your analysis of Do you think that we should just be saying, “Put the kind of foreign policy that Brazil might be Brazil on now, along with India and a few others”? expected to follow. It seems to me that you could Or should we wait for a complete reshaping of the follow that non-interventionist policy—let me call it Security Council? that for shorthand reasons—perfectly well without a Dr Riethof: Given that reform of the Security Council veto. But how would Brazil regard that kind of is a longer-term prospect, maybe. I would say that an division of responsibility within the Security Council active role could be to recognise Brazil’s various for permanent members? foreign policy roles and various formats and regions Dr Riethof: I have to say that I am not entirely sure and to use that also to support a Brazilian role at a what Brazil’s view is on that issue. global level, even if that does not immediately Professor Hurrell: You would have to inquire more translate into a permanent seat at the Security Council. directly of those who are following the specifics of As you probably know, US support for Brazil as a the negotiations. I guess that it would depend on what permanent member has not been expressed openly, the overall package of a reform looked like. For and China is apparently also not necessarily example, if it was a large reform with a large council, supporting a Brazilian bid, so some support may be would there still be a hierarchy from which Brazil useful for a Brazilian campaign in that direction. would feel excluded? It is quite difficult to answer the specific non-veto question without knowing what the Q108 Mr Watts: Can I just push you on Mike package would be, which that non-veto question Gapes’ earlier point? Would Brazil rule out would be a part of. intervention, or would it accept intervention as part of permanent membership? If, in theory, it would not Q110 Sir Menzies Campbell: Perhaps that’s want to endorse any sort of intervention under any something that should be explored on the circumstances, does it see itself as a moderating force Committee’s visit. to add something different than exists at the present May I ask you a few questions about the BRIC time? What is the motivation for them? countries? First of all, it is not a formal grouping. Professor Hurrell: One needs to unpack a little bit Nevertheless, do you think that that informal grouping the idea of intervention, because, as I said and as you has any influence upon Brazilian foreign policy? Does have heard, certainly within the region, the movement Brazil look round at the other BRIC countries and try towards a notion of non-indifference and the idea that to be equivalent to them in its approach? problems and issues often very, very deeply embedded Professor Hurrell: I am not sure about looking round in other societies require an international response, in at them. In a sense, the BRICs grouping was invented which Brazil has been willing to be active—whether out of the whole notion of emerging markets, by that is crises in Bolivia or problematic relations Goldman Sachs and so on. There are any number of between Colombia and Venezuela—is quite a people who will tell you why the BRICs make no significant movement. It is different from forcible sense as a grouping. For example, what is Russia coercive intervention, but it is still quite an important doing in there, as it is a declining power? And so movement in terms of understanding where the on. There are all the differences and contradictions country has come from and where it might go. between the foreign policies and world views of these Even in the Libya case, not just in relation to Brazil countries. All of those things are true and yet the but more generally, there were differences between the extraordinary thing about BRICs is that it has acquired two resolutions. The first resolution actually brings a kind of diplomatic reality. There are BRICs summits emerging powers along, mentioning the and I understand, as an academic outsider, that in a 7 Responsibility to Protect and mentioning the ICC, number of other groupings, such as the G20, the which, for a country like India, is a big thing to BRICs framework for co-ordinating and discussing happen. It is different and distinct from the second policy seems to have taken on a certain kind of reality. resolution, which was seen to be far too open-ended So my view is that, yes, all of the obvious problems in terms of the scope it might give to intervention. are there and BRICs are not going to be the definitive Seen in that way, it is not a black and white story in alliance that will change and structure the world, but which Brazil and other emerging countries are locked we are not really in the business of very clear into this absolutist non-intervention position. There alliances. We are in a much more fluid and flexible has been movement. The question is about the terms situation and lots of new groupings are emerging. of that movement and the terms of intervention. That Their exact status is unclear, but of those groupings, brings us back to the other question, “If you were a it is quite plausible that the BRICs grouping has quite more permanent member and achieved your goal, a lot of life left in it yet, particularly since we are would that be sufficient to shift your policy further in the process of beginning to rethink some of the and more dramatically still?” I would be quite hesitant institutional structures of global governance. My in suggesting that there is anything like an automatic bottom line is that, despite everything, there is slightly relationship between those two things. more there with BRICs than one might have expected. Q109 Sir Menzies Campbell: One of the forms of Q111 Sir Menzies Campbell: Would Brazil think permanent membership that is on the table is that it enjoyed considerable influence within that permanent membership without a veto. Would Brazil grouping? regard that as being second-rate? When you answer Professor Hurrell: If you look at all the indices, many 7 International Chamber of Commerce. articles in the Financial Times and elsewhere were Ev 28 Foreign Affairs Committee: Evidence
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof asking, “what is Brazil doing there”? It really should or undermining notions of what aid is about. I have not be there, it is in such a different rank in terms of not followed and participated at all in the official side power. We have China, and India, even, which are in of UK-Brazilian relations, but it has always seemed to material power terms, many times more important. me that the relationship over policies towards Africa is actually—I was going to say easy, but that is not Q112 Sir Menzies Campbell: All nuclear powers, in quite the right word—a good and productive one, the case of Russia, China and India. All possessing because the policies of the two countries run in broad nuclear weapons. parallel. Yes, Brazil has a particular focus on the Professor Hurrell: Yes, exactly. So what is Brazil nature of its social programmes. It makes claims about doing there? Well, we can have that debate and we its own experience, and there are different places in might argue that other kinds of power resources are terms of Portuguese Africa, but in broad terms it very important. Brazil has a number of assets that give seems to me that when people are putting together it an important place in terms of how we think about agendas for UK-Brazil, action and aid in Africa is an global governance—in the environment and so on— area where there are clearly many things that could be but from Brazil’s side, as we have already said, the done together on the ground, and perhaps also in dependence, the centrality of a kind of activist, thinking about what the aid regime more generally multilateral, small-group diplomacy is very clear. This will look like in years to come. I see it as very is the road that says: if you can’t build it on the back different in character from somewhere like China, but of your own national power, you have to build it on perhaps I have missed something. the back of what one former Brazilian diplomat called Dr Riethof: It may be a small point, but it seems from “diplomatic GNP” and the BRICs are clearly part of the evidence that Brazilian aid to Africa tends to be what you might call diplomatic GNP. much less controversial than Chinese investment and aid in Africa. Q113 Sir Menzies Campbell: That is the basis for your illustration of their role at the G20? Q116 Andrew Rosindell: In terms of relations Professor Hurrell: Yes. between Britain and Brazil, and in terms of Brazilian relations with its near neighbours, we have the issue Q114 Mr Roy: Taking you on to the issue of aid to of the Falkland Islands. What is the likelihood of Africa, should the United Kingdom Government be Brazil helping to heal the rift between Argentina and concerned about the level of aid that Brazil now puts Britain, and perhaps acting as a mediator? Is there a into Africa and its growing stature there? possibility of that? Dr Riethof: Aid from Brazil to Africa is growing fast, Secondly, if that is not a possibility, are we reading but still, on a global level, overall Brazilian the signs correctly that perhaps the hostility towards government expenditure is a relatively minor amount Britain from Brazil is growing? We have seen one or of money. However, there is very clearly growing aid two recent events that have indicated that. Is there a and also growing investment in trade with Africa. For chance that Brazil will help, or continue to support Brazil, this is partly to promote its economic interests Argentina’s claims? in the region, so Brazil is a major exporter of Dr Riethof: To start with the second question, I think manufactured goods to Africa and Africa exports we need to see the Brazilian action in January in a commodities and natural resources to Brazil. The African relationship that developed under President regional context. It was agreed in November 2010 at a Lula was focused partly on developing those interests, Union of South American Nations summit that certain developing investments from Brazilian companies, actions would be taken regionally, and that has been and also on developing diplomatic relations, promoted by Argentina for the last few years in a developing support for the Brazilian role globally and regional context. That also fits with Brazil’s agenda of for Brazilian permanent membership of the Security stressing national sovereignty and national self- Council. Whether this is something to be concerned determination. But I don’t necessarily think Brazil is about is a question of scale, because the Brazilian actually moving towards stronger support for effort there, as well as being small, focuses on aid, Argentina’s claim over the Falkland Islands. Whether and very much on social programmes and agricultural Brazil will play a mediating role in the Falklands is development. It also focuses on the Portuguese- an interesting question to explore. Of course, Brazil speaking countries, the traditional partners of Brazil has economic interests in the region, and it has in West Africa. I would say that it is relatively minor, economic interests in Argentina, so that might be a but a major part of Brazilian foreign policy in way to mediate. developing its international, global role. Q117 Andrew Rosindell: Do you feel that Brazil’s Q115 Mr Roy: But is it a way of buying support and position is purely because it is part of that region of influence? Also, based on that, is there a danger over the world, and it feels that it had better stick with its its relationship with China, which seems to be doing neighbours and back up Argentina, or does it a very similar type of exercise in that area of the genuinely support Argentina’s claim over the world? Is there a danger that those relationships could Falklands? be affected? Dr Riethof: I hesitate to say whether it does or doesn’t Professor Hurrell: I don’t see that. It seems to me a support Argentina’s claim, but I think the incident in very different kind of case from the concerns that January needs to be seen in the context of the emerge over China, in terms of strategic competition Brazilian President visiting Argentina for trade Foreign Affairs Committee: Evidence Ev 29
11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof relations, so there is also an element of political open relations with the United States. There are signs, context that needs to be considered. as part of the United States coming to terms with Professor Hurrell: I would underscore the regional strategic, emerging partners, of a new focus on Brazil. picture, and how it has changed. We mentioned a little Yet what is quite striking is the difficulty of giving while ago the background of Argentina-Brazilian much meat and substance to that agenda. It is a crude rivalry. Relations were bad in the 1970s. They began comparison, but if you compare the nature of, say, the to improve in the late ’70s, and improved substantially US-Indian relationship, there is nothing comparable between Brazil and Argentina through the 1980s. and nor is there likely to be. Of course the United When we look at a map, we think that Brazil is and States is a major player for Brazil, but Brazil, as the always has been part of Latin America, but discourse and the rhetoric has it, sees itself as a global historically that is not really accurate. Brazil has seen player and only sees the United States as one part in itself as different and distinctive from the rest of Latin the bigger range of its relationships. On that basis, it is America. The first visit by a Brazilian President to hard to imagine a situation where that kind of question Colombia was not until 1981. Brazil has been very would emerge. separate, so the move to the region, and the Dr Riethof: Although there have been quite a few importance of the region in Brazilian foreign policy, disputes and disagreements over the last few years is something we can trace. It has become a central between Brazil and the US in political fields and also part of Brazilian foreign policy, so not doing anything in the economic area, relations are generally co- that would be dramatically out of step with the region, operative and they should be seen within the general or that would interfere with its regional policy, seems foreign policy objectives of Brazil, including the to be something on which one can bank quite heavily Brazilian aim to keep support among the great as a major factor that influences what Brazil does and powers—the members of the Security Council—for doesn’t do in relation to the Falklands/Malvinas. its bid for a permanent seat. It is quite a complex relationship; it is not a formal alliance, and I think Q118 Chair: To go back to the USA, what is Brazil’s there will always be certain areas of disagreement. relationship like with the States and do you think we One of the more prominent ones is the area of trade will ever be in a position where we in the UK have to relations. choose between Brazil and the USA? Professor Hurrell: I doubt it. Q119 Chair: We have completed our questions. Have Chair: Good. we asked you all the right questions? Is there any Professor Hurrell: Many people look at the broad point you would like to summarise or are we there? history and think of the United States as being so Professor Hurrell: We have covered the UN and we obviously the completely dominant country over its have talked about nuclear. I would always include backyard, and that everything that any country in climate change and the environment as well because South America does is exclusively and heavily if we are thinking about why Brazil matters— focused on the United States. What is interesting Chair: We covered that with other witnesses. about Brazil and the United States is that as we move Professor Hurrell: I am sure you have, but on the into the post Second World War period, the periods of global issue side that is really important. Obviously, I very close relations have been few and far between. presume you are pursuing the domestic side of the The dominant picture has been of relative distance. question of sustainability, or at least the challenges, What is interesting about the more recent years is that on the domestic side, as discussed in the earlier that has not actually changed. As the United States session this afternoon. This is a necessary counterpart has become very preoccupied, post 9/11, with other to Brazil being able to do the sort of things we have parts of the world, relations, say between the Lula been talking about on the international side. Government and the Bush Administration, were Chair: Thank you both very much indeed. It is really cordial, but there was not a lot of substance. appreciated. We are going off there in three or four There are clear signs from the Brazilian government weeks’ time and it is very helpful to have this sort of that they would like to have more cordial and more briefing before we go. Ev 30 Foreign Affairs Committee: Evidence
Wednesday 8 June 2011
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Sir John Stanley Sir Menzies Campbell Rory Stewart Mike Gapes Mr Dave Watts ______
Examination of Witnesses
Witnesses: Mr Jeremy Browne MP, Minister of State, Foreign and Commonwealth Office, Angus Lapsley, Director, Americas, FCO, and Vivien Life, Acting Director, Prosperity Directorate, FCO, gave evidence.
Q120 Chair: I welcome members of the public to new on the stage, we might well look to invent this hearing of the Foreign Affairs Committee. It’s our something pretty similar to Brazil, by which I mean third and final session for our report on UK-Brazil our interests are not just economic but cultural, values relations. Our witness is the Minister of State, Jeremy based, educational and policy based. We have a lot of Browne, who is responsible for this area. He is shared interests and we wish to increase our accompanied by Angus Lapsley, Director for the engagement across the board, whether that is by Americas at the FCO, and Vivien Life, Acting having a greater number of people working in Brazil, Director of the Prosperity Directorate. I welcome you as we will do, by having more visits from high-level all. I am sorry that you got caught in the rain on the politicians—for example, the Deputy Prime Minister way here. Minister, you are now homing in on the is visiting Brazil the week after next—or through Foreign Secretary’s record for attendance before us. House of Commons engagement. I’m delighted that Mr Browne: It is what we all aspire to. you are part of this process yourselves. It may also be done through sporting links. I hope to have more Q121 Chair: He is still in the lead for appearances, Brazilians studying at British universities—and so on but you are now firmly in second place among your and so forth. I think that by 2015 we will see more colleagues. I welcome you again. It is only three or signs that Britain is more engaged with Brazil and four weeks since you were last here, when you were other countries in Latin America as well. talking about the human rights report. The Foreign Secretary told us that he thought that by 2015 the Q122 Chair: How will you measure performance? bilateral relationship between the UK and Brazil Mr Browne: Some areas lend themselves to would be visibly strengthened. What progress has measurement more easily than others. There is a been made on that over the last year, and how do you target, which you will be aware of, seeking to increase see it going over the next few years up to 2015? the value of British exports to Brazil from £2 billion Mr Browne: First, Chairman, thank you for giving annually to £4 billion annually. Of course, that is not me an opportunity to discuss this issue. That question solely the gift of the British Government; it relies on encapsulates probably the whole hour and a half that British businesses producing goods and services that we will have together, so I will try to give a Brazilians wish to buy. But it is a reasonable target, reasonably succinct answer and then look to expand and that is why our UKTI and Foreign Office teams on it in answer to subsequent questions. Let me start with a quick scene-setter. If you ranked the continents are geared up to try to achieve those targets. You of the world in a hierarchy based on the amount of could measure it, I suppose, in terms of numerical attention afforded to them by Britain—I don’t just assessments such as the number of Brazilians studying mean the British Government; I mean media, at British universities, but in other areas, it may be Parliament, dare I say it, continents that British people harder to measure so definitively as that. It may just have travelled to etc.—Latin America would be be a wider sense that Britain has not neglected the bottom of the league table. That continent has suffered relationship. from benign neglect, and I am not making a When I was in Brazil about three weeks ago, it was particularly party political point. It is noticeable, if quite striking that the general view of Brazilian one attends Foreign Office questions in the House of opinion formers—admittedly, the type of people I Commons, how few questions cover subjects to do would be likely to meet—was that they were well with Latin America, so it is a wider point. We are disposed towards Britain. They probably look more keen to address that. That doesn’t mean that I think towards Europe than towards other countries in South that Latin America will suddenly be catapulted to the America for inspiration, whether on politics, culture top of the league table, but I do think we have some or anything else. We do not, however, have a catching up to do. privileged place. Bluntly put, in many regards we are Brazil is the market leader. Its GDP is more than half behind the Germans, the Italians, and even smaller the total GDP of South America—not Latin America, European countries like the Netherlands, in aspects of because Mexico is in second place. We have all kinds our relationship with Brazil. Brazil is well disposed of shared interests. Somebody put it to me that if we towards us, but it does not give us automatic bonus were seeking to invent a world superpower that was points that are not earned in terms of our relationship Foreign Affairs Committee: Evidence Ev 31
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life with it. We have a good opportunity, but it is up to us that in Cancun he worked in greater harmony and to take it. harness with his Brazilian opposite number than with Chair: No free lunches. any other climate change or environment Minister Mr Browne: Well, you may discover otherwise, but I present at the talks. I was in Brazil and had a meeting understand your point. with Ministers and parliamentarians—many of whom you may well meet yourself in Brasília—to talk about Q123 Chair: The National Security Council has human rights issues. It is quite striking that although produced a strategy paper on Brazil, but it has not a bit of progress needs to be made in Brazil in areas been made public. Is it possible to share with us the such as prison conditions or domestic violence, for thrust of the paper? Will a version of it be made example, Brazil is quite a good voice internationally available to us, albeit on a confidential basis? in terms of our values. Rather than having the familiar Mr Browne: I am not aware of the basis on which cast list of European countries and North Americans those papers are produced and distributed; that is not a making those points, there is the opportunity for a new decision that I make. There may be some information voice to make points that we would support. contained within the paper that is of a sensitive nature, In commercial and business terms, Brazil is the but most of the areas that were considered were not seventh largest economy in the world, and it will security based but about economic prosperity, trade, shortly be the fifth largest—that depends slightly on environmental engagement, educational links and so how you measure such things, but it will overtake us on. I wouldn’t have thought that it would be necessary and the French reasonably soon. Brazil is still only the to withhold most of that material, but I am not 83rd largest in GDP per capita, before people get too responsible for the Secretariat of the National carried away with the quality of living of the average Security Council. Brazilian, but in economic terms—in terms of its dollars GDP per capita, which I think is $8,000 or Q124 Chair: Will you be able to look at whether or $9,000—Brazil is getting into territory where what the not we could be briefed on its content? British economy offers, in terms of services or hi-tech Mr Browne: It may be that Angus, who leads on the manufacturing, is very compatible with the next phase Americas for us in the Foreign Office, will wish to of Brazilian economic development. So, in political, answer that. To spare you leafing through it all, the values and economic terms, there is a greater marriage best solution might be if you have a meeting directly between what we offer and what the Brazilians with him and discuss some of these issues in greater require—therefore, to the mutual benefit of both of detail. us—than may be the case with some other countries. Angus Lapsley: I am certainly open to that, but there may be a short cut which might help you. The network Q126 Rory Stewart: In terms of getting, bluntly, into in Brazil, like all Foreign Office diplomatic networks, a position where we could reasonably compete with has what is called a country business plan, which is France or Germany in Brazil, are you sure that we very closely based on the strategy adopted by the NSC. If that is not on the embassy website, it will be have the right kind of embassy and the right shortly and we can certainly share a copy of that with approach? We have two extensive speakers of you. It basically sets out what we in London are Portuguese in the embassy, and perhaps four or five asking the network in Brazil to deliver. It is very much operational speakers among the UK-based staff. We based on that strategy and will give you all you need, do the Queen’s birthday party at lunch time, and in bar the most sensitive bits which, as the Minister said, football strips last year. We are not really penetrating are not in the public domain. the Brazilian elite in the way that the French or Chair: Thank you; that would be helpful. German embassies have over the last 20 or 30 years, partly because we have tended to focus on climate Q125 Rory Stewart: We talk a lot about developing change. Are you proposing to do anything that would a strategic relationship with Brazil. What does that allow you to develop the political context for the mean that is any different from the kind of Brazilian elite, where our European competitors are relationship we might have with India, South Africa or well ahead of us and have been consistently? any other big regional power? What is the difference Mr Browne: You are right to make the observations between saying, “This is a regional power; it matters about Germany and Italy. and Britain has a relationship with it,” and saying that Rory Stewart: And France. we want a strategic relationship? Mr Browne: And France. It was striking to me, Mr Browne: That is a good question. You would be although it may be old news to everyone else in the hard pressed to find a Foreign Office Minister who room, how many Brazilians have German, Italian, or, says that they do not want to have a good relationship to a degree, French ancestry, and therefore perhaps with countries such as India and South Africa. I tend have a disposition towards having connections with to find, given the nature of a lot of papers that are and doing business with those countries in Europe. I produced in the Foreign Office, that we seek to have have no personal objection to us making a virtue of a good relationship with pretty much everybody. What our shared interest in football, but I take your would make Brazil different, however, is that there is underlying point, which is that the Brazilian political a high degree of compatibility between our political establishment, civil service, and diplomatic service are approach and that of the Brazilians. high calibre, impressive operators, and we need to For example, I was not there myself but I was told by ensure that we engage effectively at a level that is the Secretary of State for Energy and Climate Change likely to maximise our influence. Ev 32 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life
Perhaps a wider point that you are touching on is what interest and a sense of people being in a part of the value the Foreign Office puts on what we now call Department where their skills are valued. As I have diplomatic excellence, by which we mean deep only been there for a year, however, I would defer to understanding of a country’s culture, history, political those who have been there longer. system, architecture and language, compared with Angus Lapsley: Six months longer than me. I have having a campaign-mode diplomacy, if you like. It is three brief points. On languages, it may be a little bit true to say that this Government has shifted the better than you perhaps think. The distinction between emphasis away from what I described as campaign- operational and extensive is often to do with whether mode diplomacy—important though some campaigns you have come back home to do the exams or not. In are—towards trying to make sure that we get the core practice, we would expect the people in Brasília and basics right, in terms of our diplomatic offering. That São Paulo and elsewhere to be working at an completely applies in countries around the world extensive level, and I am pretty confident that our where the pace of change is fastest. I would like us front-line staff are doing just that. to have more people in the Foreign Office learning Secondly, the job of Ambassador in Brazil is now one Mandarin, or having a really sophisticated of the top jobs in the Foreign Office. It is one of the understanding of the politics of all the different parts 10 or so SMS-3 or director-general level of India. It is not just a Brazil issue. What does the ambassadorships. It really is one of the most highly Foreign Office exist to do? It is to have a more sought after jobs. sophisticated and deeper understanding of all the Thirdly, you are right that a lot of our effort has been different countries in the world than would otherwise on climate change. That is where a lot of the staff exist if the Foreign Office were not there. have been, but we are broadening that out. I was not I am entirely sympathetic to your question. I hope that able to talk about this when I met the Committee we are going in that direction. I would not informally, but the Foreign Secretary has now made underestimate the calibre of the people that we have his announcements about network shift, and we are there—we have many good people—but I would be reinforcing our network in Brazil. We are doing interested to hear what the Committee thinks about targeted reinforcements such as, for example, putting ways that we can make further improvements in the somebody into Rio to work specifically on sports years ahead. issues in the run up to the World Cup and the Olympics, where there are huge commercial Q127 Rory Stewart: Is there any opportunity to opportunities. We are also putting extra people in to build up a more developed cadre of specialists, who do basic political economy work, so that we really could specialise in the Portuguese language, or in understand what is happening in Brazil and provide Latin America, and who could really organise their people in our embassy that the whole of Whitehall can careers around that kind of understanding and those plug into and get really good high-quality advice on relationships? what is happening in the country. To that extent, I Mr Browne: Let me comment briefly, then come to agree with you, and we are moving in the direction of Angus or Vivien. There is a wider point, which is that a reinforced network in Brazil. if you are an ambitious young person joining the Foreign Office, how do you make it to the top, and Q128 Sir Menzies Campbell: I am stimulated by the what do you even regard as the top? Is your ambition discussion about strategic, and in a moment or two I to become the Ambassador in Washington? Most want to ask some more questions about the global role people would probably regard that as the most senior that Brazil might play. But is not a strategic job, but it could be the United Nations or Paris— relationship one where there is a sense of common whatever it might be. I would be keen to see a greater purpose—not necessarily in every aspect of the number of people who could see their career relationship—which also implies a degree of advancing through greater knowledge of Latin partnership? If I am right about that, are you able to America. identify areas in which you think—apart from the That reflects the wider observation that I made right climate area that you referred to—there is the at the beginning, which was when I said that if you opportunity for common purpose and partnership? rank the continents of the world by how they are Mr Browne: Yes. I take your point, which is that we perceived in Britain, you would probably put Latin want to have a relationship where we feel that the two America at the bottom. It would be odd if the Foreign countries represent something more than the sum of Office was completely removed from that, and it is their parts and can speak together with an amplified possibly the case that some people joining the Foreign voice in international arenas. If you take the example Office think that they will see more high-profile work that you may have in the back of your mind about in the Middle East or elsewhere in Europe, for Brazil abstaining on the vote on Libya in the United example, than they might see in Latin America. So Nations, that would be an example of where we are there is an internal perception issue that we need to not, at this stage, able to reach that conclusion. address within Government. Having said that, there are quite a lot of areas where What makes a difference of course—I will put this we are fairly in sync. Many of our business and in terms that may slightly flatter the Committee—are commercial interests overlap. Our sporting and things like the Foreign Affairs Committee going to cultural interests overlap. We are deficient in terms of Latin America or the Minister needing to be prepared our educational exchanges, but not because there is an for a session in front of the Committee on a Latin antipathy towards educational exchanges. It has just American country. All of that creates a sense of suffered to a degree from neglect and insufficient Foreign Affairs Committee: Evidence Ev 33
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life attention. To put it in non-diplomatic terms, I have Whether you could have a Security Council, with 10 just come back from China, which I also cover, and countries exercising a veto, which was still able to my conversation about human rights in Brazil takes a make decisions on very much, is a moot point. rather different form from my conversation about One potential area for compromise would be human rights in China. There is a lot of synergy in permanent membership without a veto. The Brazilians terms of political and values-based agendas, which are appreciative of us supporting their position. The means that, by and large, we are in the same place as only sensitivity is that the Mexicans are less Brazil on more issues than we are not. enthusiastic about Brazilian permanent membership than the Brazilians are, as you might imagine. It is a Q129 Sir Menzies Campbell: That leads logically good basis for us to argue the Brazilian case. The on to the question of what role you would expect default mechanism in all these institutions is to stick Brazil to play as it emerges, given that the analysis with what you have got, unless there is a momentum tends to suggest that the more economically powerful to change. That is always difficult to effect and there a country becomes, the more politically ambitious it are interests that prevent that from happening. I have becomes. We have China and India as very eloquent not discussed it in those terms with them, but the examples of that. What role does Her Majesty’s Brazilians certainly aspire to exercise a bigger role on Government expect Brazil to play? the world stage, and we are instinctively sympathetic Mr Browne: Brazil itself aspires to play a global role to that objective. rather than a continental role. It sees itself increasingly in those terms. The only observation I would make Q132 Sir Menzies Campbell: You mentioned the about all of the three countries that you have correlation between rights and responsibilities. How mentioned is that Britain, France and the United States big a policy change do you think it was for Brazil to have a lot of experience in playing global roles. vote in favour of a Special Rapporteur on Human Rights for Iran? Q130 Sir Menzies Campbell: Some of them Mr Browne: I think it is a significant policy change colonial. and it has been interpreted as such, because there is Mr Browne: Drawing on all kinds of sources. The quite an abstentionist mindset in some aspects of point I am making is that that comes with a degree of Brazilian foreign policy and, if I am being more expertise and self-confidence in institutions like the general, in some aspects of Latin American foreign United Nations, which is not necessarily acquired policy as a whole, in so much as it can be seen as a overnight. We welcome many of the countries having collective body of thinking. I did not previously get a a greater role. We support Brazilian and Indian sense that there was a desire to frustrate the ambitions permanent membership of the UN Security Council, of countries such as Britain, but there may not have but that comes with obligations. It is not necessarily been a great enthusiasm for supporting those as straightforward or as attractive as it may appear on ambitions, so that is quite a significant shift, because first inspection. All those countries are feeling their it suggests that the Brazilians are in a position that we way into greater global roles. We are keen for them to would like them to be in, and keen to take a do so. It is a gap that the UN Security Council does responsible leadership position on a country that is in not have a permanent Latin American member. It a completely different part of the world from them. In would be strengthened by having permanent representation from that part of the world, although other words, they are thinking globally rather than on that would, of course, give the country that was a regional basis. Given that we broadly share the same representing that broader interest, in this case Brazil, outlook as the Brazilians, we welcome their wider a degree of obligation or responsibility that it had not interest. previously exercised. Q133 Sir Menzies Campbell: But measured Q131 Sir Menzies Campbell: If we can deal with against—as you said in your introduction—the the UN question. As you know, the debate about disappointment over their vote in relation to the United Nations reform has taken place for a long time, resolution. usually focused entirely on membership of the Mr Browne: Yes, it was an interesting vote. The five Security Council, although there is a wider argument abstainers were rather significant countries, but of about reform generally, including elsewhere in the course in some cases the assessment was that an United Nations architecture. For example, one of the abstention was not a bad result, because the alternative ideas that has been floated is, “Yes, there can be was a vote in the opposite direction from us. I would permanent membership for countries like Brazil and not necessarily put Brazil in that category. I think that India, but there will be no extension of the veto.” Is Brazil is a country that we would think of as that an argument or discussion that you have had with abstaining, but inclining towards the British side of those interests in Brazil who are anxious to promote the debate rather than the alternative side. But it is the case for permanent membership? quite striking that, for example, the Colombians voted Mr Browne: The straight answer to your question is with us on that decisive resolution and did so with no, I have not discussed it in those terms. Britain has great clarity and lack of fuss, if I can put it in those a long-standing position, which has not been altered terms. They were very clear-minded about the way by a new Government coming into office, to expand they cast their vote, and that was not the case with the the permanent membership to include Germany, Brazilians, so different countries are in different Japan, India, Brazil and African representation. places. Ev 34 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life
The Brazilians are the largest country by some margin There is a growing ambition on defence in Brazil. in every regard in Latin America, but they are not That is essentially focused on its own regional necessarily the country that we would see as having security and, in particular, its maritime security, which the quickest or—how can I put it?—greatest offers considerable potential for co-operation, with the compatibility with us on all foreign policy issues in Royal Navy for example. It is also focused on Latin America. But they are in a position with which peacekeeping. Brazil already plays a significant role we are comfortable, and with which they are in Haiti, where it leads the international peacekeeping comfortable as well. We enjoy working with the operation. We would like Brazil’s international role in Brazilians. We see it as a partnership that has strong peacekeeping to continue growing and we are offering potential to develop further in a good direction. co-operation and partnership to help with that.
Q134 Sir Menzies Campbell: They are putting a lot Q137 Sir John Stanley: Minister, I have a couple of of resources into their foreign service. It has also been questions, both of which are on the international front, suggested that, were they to become a global power, but are in two different areas. First, the international whatever that may mean, they would want to spend Arms Trade Treaty is going to start and it reaches a rather more money on defence. Do you attach any critical negotiating phase next year. I have received significance either to the first of these, or the second— advice from officials in your Department that Brazil the ambition? is adopting a less than positive attitude towards the Mr Browne: Certainly to the former. The Brazilians Arms Trade Treaty. In particular, it is seeking to are seeing themselves as having a greater global role, remove or to exclude the all-important reporting and one manifestation of that is Brazilian embassies obligations on countries that become signatories and and consulates opening up in different parts of the ratifiers of the treaty relating to the arms export world, with very high calibre staff and larger numbers licences that they approve, which is, of course, absolutely fundamental to the treaty. What steps are of staff. I strongly support the Government’s deficit the British Government taking to try to get Brazil to reduction measures, but as a Foreign Office Minister adopt a more positive and constructive attitude I am quite struck by how little we spend on global towards the Arms Trade Treaty? diplomacy. Mr Browne: I am searching around because I do not have an off-the-peg answer for you. Unless anyone Q135 Sir Menzies Campbell: You will find a ready else wishes to answer, I would say that perhaps that ear for that. answers the question in its own way. I am not aware Mr Browne: I think the French, who have almost of a situation that is as concerning as the one you exactly the same population and GDP as us, spend imply, Sir John. We have a co-operative relationship double what we spend. That is always seen as a cost- with Brazil and I do not know of anything to suggest free decision by us, or at least some people may think that it is seeking to be obstructionist in that way. All it is cost-free. We have extremely able people and so I can do is undertake to find out whether there is it does not always show. But it is a more competitive further work to be done. global environment. Countries such as Brazil, but also other major countries that have been mentioned Q138 Sir John Stanley: You have seen the question already—China being a perfect case in point—are that I have put, so perhaps you would like to follow seeking to paint on a broader canvas, and we need it up with a response in writing when you have had to be mindful of the potential consequences of that, time to make some further inquiries. although, in the case of Brazil, that may well mean Mr Browne: Absolutely. I apologise, but perhaps the that we have a willing ally in more countries than we reason why I am not alert to those concerns is because previously did, so it may be an entirely positive I have not heard Brazil being raised in that context. development. Mostly, when Brazil is discussed in defence and arms In terms of defence, Brazil has not previously been export terms it is seen—as Sir Ming has alluded to— regarded as particularly expansionist, and compared as being a benign force and a potential market for with other developing superpowers that is still the some of our sales, rather than as being on the other case, but it may well see its role increasing in the end of the spectrum and frustrating our values. We years ahead. need to check whether there is an area there that we should be concerned about. I will certainly let you 1 Q136 Sir Menzies Campbell: It might be a market know if that requires further work. for our redundant frigates. Angus Lapsley: Two points: there are some parts of Q139 Sir John Stanley: Thank you. My second the world in which the Brazilians have stepped up question relates to human rights. You referred to your their diplomatic representation, in which they conversations on human rights in Brazil. The advice I represent a new partner for us, particularly in West have from the House of Commons Library is that Africa and the Caribbean. That is very helpful, Brazil has neither signed nor ratified the amendment because those are parts of the world in which we have to article 8 of the International Convention on the long wanted other people to get involved and it is Elimination of All Forms of Racial Discrimination; useful to have another interested partner. The she has neither signed nor ratified the optional protocol to the International Covenant on Economic, Brazilians are becoming an increasingly important Social and Cultural Rights; she has neither signed nor development player, because they are prepared to put money in. 1 See Ev 67. Foreign Affairs Committee: Evidence Ev 35
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life ratified amendments to articles 17(7) and 18(5) of the budget, yet less than 1% of the world’s population live Convention against Torture and Other Cruel, Inhuman in Britain. All the other departments, apart from DFID or Degrading Treatment or Punishment; and she has and Defence, have to deal with 1% and we get the not signed or ratified the International Convention on remaining 99% to keep an eye on. As a result, we the Protection of the Rights of All Migrant Workers have to make economies and efficiencies—I do not and Members of their Families. Minister, I would not actually mean just this Government. I think that this expect you to respond immediately to that, but could is, to an extent, over a period of time, a process that I ask you to respond in writing about whether that is means there are areas that we could look to do more indeed the position of the Brazilian government, and in than we currently do. if so, whether the British Government is seeking to Having said all of that, let me make two quick amend the Brazilian position? As you will appreciate, observations. First, some of those changes and because of the way in which the Committee operates, efficiencies have strengthened aspects of our work. we are not able to take direct evidential material when Some of our locally engaged staff cost us less to we go overseas, so it would be very helpful if you employ, but give us a different understanding of the could fill in for us what you understand the Brazilian host country, which can be beneficial. Secondly, justifications are for these non-signatories and non- within the Government, under the direction of the ratifications, and whether the British Government is Foreign Secretary, we have consciously looked to try trying to change the Brazilian position. to adapt our Foreign Office network to take account Mr Browne: May I thank you, Sir John, for not of the changes that have taken place in the world. The expecting a detailed answer on each of those tendency, or the risk, is to bring the Foreign Office individual points? Of course, I will let you know what network up to date with now, then leave it for 10 years our detailed response is in writing.2 until we have the next review. Then, it goes more and The only slightly wider observation that I would more out of date, until it is 10 years out of date, and quickly make now is that because a country has not you bring it up to present again, then allow it slowly signed a particular resolution, it does not necessarily to go 10 years out of date again. We are trying to get mean that it does not have an enlightened policy in ahead now and anticipate future changes in the world that area. In terms of the conversations that I had and that is why we are shifting more of our fairly when I was in Brazil, my observations are that there limited resources into China, India and Brazil. It does is a general feeling that significant progress has been not take a genius to work out that those countries are made, that further progress still needs to be made, that increasing in importance, but we are trying to make there are groups in society who can feel excluded or sure that increased importance and anticipation of an unfairly treated, and that there may be a lag in some even greater increase in the future are reflected in the areas between social attitudes and the law—in other way that we deploy resources. Brazil is part of that words, something may not be legal, but that does not equation. mean it does not happen, and I am thinking about such areas as domestic violence, for example. However, Q141 Mr Watts: Given that Brazil is one of the main there seemed to be a high degree of awareness of areas that the Government has identified financially those subjects, and the resolve to make progress. I where they want to be and where they want to felt like I was talking with a group of people—the strengthen, how many more posts have we in Brazil parliamentarians and Ministers that I met—who at the moment? How does that compare with some of shared our views and our approach to such matters. the other missions? We talk about the French and the As I said earlier, that has some wider benefits, as it Germans having a start on us as far as competition is does with international development, in terms of there concerned. Have we anywhere near the resources that being a new world player that may be listened to more we need to actually compete with them? sympathetically than Britain sometimes is, and which Angus Lapsley: As the regional director responsible may be able to try and lead the debate in other parts for this part of the world, I would obviously always of the world, where our values are not always so like a bit more to play with. But, when I look at our readily shared by other countries. Brazilian network and its impact in country, it I felt that the Brazilians were in quite a good place on compares very well to other European countries. That those issues, and they acknowledged that where they is partly for the reasons to which the Minister referred. were not, they wanted to do better. However, you have We deliver quite a lot through highly talented local given me more cause for concern, so I will reply to the detailed questions, as you asked. staff, whereas the French and German missions would probably bring people over who, as Mr Stewart referred to, might not necessarily speak Portuguese Q140 Mr Watts: Minister, you showed some and might spend a lot of time at receptions, but not concern about the level of resources that you have much time out there doing stuff. We feel that the globally. Does that reflect itself in Brazil? If so, what network has a high impact, but we are increasing it. problems do you create by not having the resources To answer your specific question, we will be putting that perhaps some other embassies have? probably five to six additional diplomats into the Mr Browne: I think Britain borrows more money Brazilian network over the next 12 months or so. We every weekend than it spends annually on global are going through recruitment processes at the diplomacy—that is the context in which I was making moment, making sure that they have the right those observations. Some government departments language skills and things like that. In terms of have rounding errors bigger than the Foreign Office absorption capacity and actually making sure that we 2 See Ev 67. are putting people in who have real jobs to do, that Ev 36 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life feels about right to me—notwithstanding that I would concluded last year. DFID pulled out of Latin America always like a little bit more. some time ago, as part of its focus on the poorest Mr Browne: May I add a brief supplementary? countries in the world, but the one place in Latin Consciously, when I visit large countries, I try to get America where it still keeps staff—I cannot remember away from just visiting capitals. The Foreign whether it is two or three—is Brasília, precisely to Secretary and the Prime Minister are likely to go the work on this question of Brazil as a partner, principal city and the capital city if those are two principally in Africa, but not just in Africa. Brazil is different places. I went to a city in the south of Brazil an increasingly effective voice on a whole range of called Porto Alegre. We have one or maybe two global development issues. locally deployed staff there, but it is not a full-blown British consulate. I was there for only two thirds of a Q144 Mike Gapes: Can I take you back to Brazil’s day, and they organised an excellent programme. The foreign policy and relationship with the UN system? local knowledge of the person who principally President Dilma Rousseff was elected, or took office, organised it was extremely valuable. As far as I could at the beginning of January, and since then we have work out, she knew everybody who there was to know had, as was already mentioned, the resolutions on in that city with 1.5 million people, and in which Libya. I want to explore that a bit further, and go a bit Britain has some significant trade and cultural interest. further than where you were in the previous answer. It is not necessarily the case that the more expensive One of the witnesses in a previous session said that the member of the staff and the more British they are, Brazil’s abstention on Security Council resolution the more effective they are on behalf of Britain. That 1973 should not be interpreted as Brazil remaining anecdotal example showed that we were able to get firmly in a non-interventionist position. I want to very good value for money and a good presence in know where you assess Brazil to be. Is Brazil fully that city. signed up to the responsibility to protect concept, or is it some way away from that? Why did it take the Q142 Rory Stewart: I have a couple of thoughts. In position that it did—abstaining on Security Council terms of strengthening your strategic relationship, on resolution 1973, but supporting Security Council defence when was the last time the Chief of the resolution 1970? Is that because it is uncomfortable Defence Staff visited Brazil? On Brazilian with the idea of the use of force? development in Africa, why is DFID not putting more Mr Browne: That is a very good question. I cannot money into working more closely with Brazil in give you a fly-on-the-wall account, because I am not Africa? the Minister responsible for the United Nations. I am Mr Browne: Pass on question one. Gerald Howarth, responsible for Brazil, and as a result I was not party Defence Minister, has visited Brazil in the past year to the details of those negotiations in New York. since the Government was formed. We have a defence Rather than just leave it there, let me engage a bit relationship, but I do not know when the Chief of the more widely on your point, which is that Brazil is not Defence Staff last visited. There is only one Chief of fully persuaded. If it was, it would not have abstained. the Defence Staff, and there are a lot of countries in There are a handful of countries in Latin America that the world in which Britain has defence interests, so we really struggle to see eye to eye with on these the Chief of Defence Staff needs a bit of time to think matters. Brazil is definitely not one of those. Of the about defence as well as travelling to countries in the remaining countries, there are some that are more world where, I am sure, there is a huge demand for enthusiastically and unequivocally in the position that him to be, were he able to arrive. We want to have a we are in on these matters. I cited Colombia, because keen relationship with them and that is indicated by it had an opportunity to exercise a vote. Mexico would one of our Defence Ministers visiting reasonably be in that position as well. There are others that hang recently. back, but are not hostile to our analysis of the situation. That is where we are. Q143 Rory Stewart: DFID and Africa? I look at Latin America as a whole and regard it as an Mr Browne: When I was in Brazil three or four weeks extraordinary success story. It is a continent that 25 ago, I attended a reception that may be illustrative of or 30 years ago—only a generation ago—had a large this point. There was a DFID programme to help number of countries with basket-case economies run Kenya, but a lot of the training with the Kenyans was by autocrats of one type or another. It now largely being done in partnership with the Brazilians. That has economies that are growing strongly, with deficits was seen as a potentially productive way of achieving considerably lower than our own, and democratically the objective. The reception, slightly improbably, was elected leaders. I suppose my point is that the for lots of Kenyans who were in Brasília. The continent as a whole, inasmuch as one can generalise, programme was, from memory, at least in part funded has moved massively in the right direction, as we by DFID, so there are opportunities. I have never been would see it, over an accelerated period of time. to the north-east of Brazil, but I am told that if one Different countries are at different steps in the process goes there, there is a greater sort of empathy with of how they respond to those movements, consolidate Africa, just because of the geographic proximity. That them and analyse them. By and large, with one or two is an area that I imagine DFID would like to explore. exceptions, they have all moved in that direction Angus Lapsley: I do not know when the CDS last together. went, but certainly the First Sea Lord was there last year. We have annual high-level staff talks between Q145 Mike Gapes: Can I take you back, though? the militaries as part of the defence treaty that was The key point that I am trying to make is that Brazil Foreign Affairs Committee: Evidence Ev 37
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life has an ideological view of the world that is non- political culture are not yet in the position of being intervention in other countries’ internal affairs. That ready to accept the harder edge of intervention. was explicitly stated on a number of occasions in the past under President Lula. I am interested to know Q148 Mike Gapes: That might be in certain whether Brazil is now at least prepared to engage with countries—say, Egypt or Tunisia—but you are not the idea of the responsibility to protect—not talking about Libya at this stage, are you? rhetorically, but actually in practice. For example, is Angus Lapsley: Maybe not at this stage, but Brazil there any indication that Brazil is prepared to help in has significant interests in Libya; it has quite a any way with the implementation or enforcement of significant oil presence there, for example. resolution 1973? Mr Browne: The honest answer is that Brazil is not Q149 Mike Gapes: Is that why it abstained? fully in the place that you describe. If it were, it would Angus Lapsley: Like many of us who have interests have behaved accordingly. I have had this in Libya, it had to balance those interests and think conversation—not with the Brazilians, but as a private about how it responded. My point is that, as Libya conversation, so I shall leave the person nameless— moves forward in its transition as we hope it will, with someone from another country in Latin America. the Brazilians and others in the region have a role The conversation went along the lines of, “We are in in supporting economic growth and reform in those favour of human rights and peace, and we are in countries, as well as helping them to build a favour of non-interventionism.” I said, “What happens sustainable democracy after years and years of if you need to intervene to protect the human rights something else. and the peace?” We moved on to the next course. But there is a debate to be had, and some of the Latin Q150 Mike Gapes: There was a reference to the American countries share my implied analysis in that position that was taken on human rights in Iran. I am question, which was that there are times when you do interested to know whether there is a follow-up to need to intervene to safeguard or advance our values. that. Are we likely to see a repetition of the new There are other countries that are not completely Brazilian President meeting and having photographs hostile to that idea, but would prefer somehow to try with the President of Iran in the future, as happened a to reconcile those two, even when it is a struggle to year ago? That was controversial. Also, are we likely do so. From observing, Brazil is in that position. to see a repetition of the initiative that Brazil took at that time with Turkey on the Iranian nuclear Q146 Mike Gapes: At Prime Minister’s questions programme? Is there a view on how that has been today, the Prime Minister responded to a question by perceived? Do we have an assessment on whether that saying that the Government was going to push, with approach is now seen to have been a mistake and the French, a Security Council resolution on the whether Brazil is now moving, because of this state situation in Syria. Do you think that Brazil will position on human rights, to a slightly different abstain on that, or is it likely to support it? approach? Mr Browne: I will answer, if no one else is Mr Browne: My hope is that we will not see a repeat volunteering to do so first. I very much hope that it of that photo with the new President of Brazil. That would vote in favour of the position that the Prime is not in Brazil’s interests, and I hope that Brazil sees Minister outlined, for the reasons that I have just why Britain and other countries take the view that we expressed. take on Iran for a whole range of reasons, with human rights high on that list, but also including nuclear Q147 Mike Gapes: I did not ask what you hoped; I proliferation and other concerns that we have. That is asked what you thought would happen. not to say that I do not think that Brazil should have Mr Browne: It will be an interesting test of whether a wide and ambitious foreign policy. It is entirely up Brazil has moved further down the track. I hope that to Brazil to have that. it has, and that it will vote in the way that the Prime I do not want us to feel that it is only countries like Minister described, but that is a decision for Brazil the United Kingdom, France and the United States to make. that are allowed to have a global view and that Angus Lapsley: Intervention means many different somehow the Brazilians should not be thinking things. Clearly, many Latin American countries are beyond their own continent. It is entirely legitimate uncomfortable with hard-edged intervention. That is for them to have that wider role, but it is how they partly to do with their own post-colonial histories, and choose to exercise that wider role. My view is that the they have a strong sense of the importance of choice they took a few years ago was not wise. Voting preserving the integrity of national sovereignty. We on the Special Rapporteur on Human Rights was the understand that, but there are other ways in which right way to go and the best decision that they could they can help. One of the things that we have been have made. I hope that that is indicative of Brazil talking to Brazil about is the way that it, as a model using its global role in ways that are more compatible for economic and political transition, in common with with our objectives in the future. many other Latin American countries, has an awful lot to offer the Arab world as it goes through its own Q151 Mike Gapes: It was a year ago, when President political and economic transition. Perhaps it is in that Lula made his initiative. At that point, for the first kind of way that those countries can most helpfully time ever, Brazil voted against the US. Some get involved, at a stage when their public opinion and academics interpreted that as a symbolic statement of Ev 38 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life third-world solidarity against the US. Is that the view that I am making is that there is no general policy that that we take? we, the Europeans or the G8 countries, need to try and Mr Browne: I do not think that Brazil would regard hoard all of the positions of international influence itself as being part of third-world solidarity, but it may and ensure that the emerging powers do not start to well regard itself as not having automatically to get their hands on those jobs. If there are good people, follow a leadership set for the Americas as a whole by we should consider them. the United States of America; that it is an independent power with its own ability to make decisions and to Q154 Mr Watts: I was not saying that we would come to conclusions without being in harness with the oppose it; I was merely trying to ask whether we Americans. That is true. There is no reason why it would actually actively support such a nomination. should be subservient to the United States or other Mr Browne: I could envisage circumstances— countries. I would hope that in coming to those Mr Watts: Do we work with the Brazilian independent conclusions, it would be guided by the government to actually support their applications for same considerations that countries like the United those sorts of posts? States or Britain have. It comes back to my earlier Mr Browne: In my limited experience of a year in the point that having a global role comes with all kinds job, I am quite struck by how energetically countries of practical difficulties and obligations, as well as lobby for their person to be considered for an opportunities. international body. We get representations forcefully made, and at every single bilateral meeting “Please Q152 Mr Watts: We have heard that Brazil wants to bear in mind the qualities of our particular candidate play a more important role on the world stage and we for this particular post” comes up on the agenda. have talked about the likelihood that they would want Normally, there are three or four people in the running to expand their military capacity. We have also heard and all the countries are lobbying for it. All I am that it is unlikely that they would want to develop a saying is that we do not have a list of preferred nuclear weapon system. Is that still the view? What countries. We do not have a predisposition to always sort of military presence does Brazil want to develop? support the European or someone who comes from Mr Browne: That is my understanding. When I visit an English-speaking country or whatever other reflex Latin America, I am struck that there seems to be a starting point we might have. If the best person for a very high degree of attachment to the concept of Latin hypothetical global job was a Brazilian, I cannot America being a nuclear-free continent. I have not foresee why there would be any barriers to us heard any particularly strong or compelling voices supporting the Brazilian. within Brazil or other Latin American countries that are arguing for a different approach. I would envisage, Q155 Mr Watts: But would it be a good idea for us therefore, that Brazil would have an increased military actually to talk to them about their ambitions, what capacity, which would reflect the fact that in the next they would like, and how they see their role few years it will become the fifth largest economy in developing to take into account their growth in the world. It already is, by a big margin, the biggest economic terms? Would it be a good idea to be seen force in its particular continent, and it may well seek as someone friendly to them and someone supportive, to have a military capacity that, as I say, in some way who will actively assist them in their policies? That reflects that status. However, nothing that I have heard would, in a way, assist our policies in Brazil. suggests that I should envisage them having a nuclear Mr Browne: I have no objection to that. Those are weapons capacity. exactly the sort of conversations that we could have. We are seeking to demonstrate exactly that type of Q153 Mr Watts: Turning to other areas where they friendliness across a whole range of subjects on a may want to develop, one of the things that we could daily basis. I do not measure friendship purely in do or that we could have done is to support the 3 terms of the number of people whom we support for nomination of a Brazilian for the IMF, for example. nominations to international bodies, but the Brazilians Is that something that we actually considered or is it certainly should not think that we have any antipathy something that we do not think is desirable? Is to Brazilians occupying important international posts. supporting them in global institutional jobs, such as On the contrary, we would be enthusiastic, and we the one that I have just outlined, something that we would judge the candidates on their merits. think will help to lock in Brazil? The wider point is that, if anything, we might have a Mr Browne: As I understand it, the lead department predisposition to support Brazilians or others from in Government on that specific decision is the Latin America, for the reason that I gave about 10 or Treasury rather than the Foreign Office. In general 15 minutes ago. If you look at the world 25 or 30 terms, however, we certainly do not have an antipathy years ago, when I was growing up, one of the big to Brazilians occupying influential international changes, of course, was the reunification of Europe positions. As I said, there are many Brazilians in their and the end of the Soviet Union, just under 22 years civil service and their public life who have a high ago. The other extraordinary change, which is degree of aptitude and experience, and where the most commented on far less and relates to the advance of suitable candidate for a particular position is a democracy, if I can put it in those terms, is Latin Brazilian, I could not imagine any reason, in the vast America, which has undergone a complete majority of circumstances, why that person would not transformation. In terms of it being a values ally, if I be the person who ought to occupy the post. The point can put it in those terms, for Britain, Europe and North 3 International Monetary Fund America as a whole, and an important counterbalance Foreign Affairs Committee: Evidence Ev 39
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life in global affairs, we are in an extremely fortunate and Brazilians think the way they do on OPEC—so I am happy position. happy to seek guidance from people. I will give you a counter-historical narrative. Imagine if it had all gone in the other direction; we would be Q158 Mr Baron: Perhaps somebody else wants to looking at a very bleak position indeed. Countries take that up. right across Latin America, including Brazil as the Angus Lapsley: Perhaps Vivien can reply to the best or biggest example, have embraced free market specific OPEC point. On the foreign policy point, it economics. They have broadly embraced free trade, probably does, or will, lead to a reinforcement of democracy, civil liberties, free media, and all the other Brazil’s sense that it is arriving on the world scene, values that we regard as important in this country, and that it has the means—the wherewithal—to which is a huge step forward. We have no inclination operate on it. To come back to Mr Watts’s question not to support Brazilians. Actually, because we are about defence priorities, that is clearly a big factor, very enthusiastic about that process, it may well be and one of the main areas it will invest in is the blue- that a Brazilian, as a hypothetical person for a water naval capacity to protect its offshore assets and hypothetical job, would be someone we were very so on. That will skew things. What you will not see enthusiastic about. is what we have seen in Venezuela, for example, which has used its oil money to pursue a very Q156 Mr Baron: There have been big oil discoveries interventionist and quite idiosyncratic foreign policy off the coast of Brazil, if I may just turn us to the around the region. I do not think that is Brazil’s style issue of trade, and the effect that trade can have on at all. Brazil’s economic and foreign policy. The twists and turns have been interesting, with regard to Brazil’s Q159 Mr Baron: There is quite a difference in decision on whether it will join OPEC. That has been approach. linked to its desire to be a permanent member of the Angus Lapsley: Exactly. Security Council. How do you see the larger oil Vivien Life: We also have to look at how it is making discoveries impacting on Brazil’s economic and that decision. In the end, it is a decision for Brazil foreign policy? itself. We would hope that as it increasingly becomes Mr Browne: Brazil is a very interesting country, in a supplier of oil, it will work closely with us on our energy terms. I wrote down some statistics, because agenda of how we try to respond to oil price volatility. they tell a compelling story in their own right. 80% We want to talk to Brazil about what kind of relationship it might want to have with the IEA,4 as of Brazil’s electricity is from hydro power. It says on the IEA tries to tackle issues such as fossil fuel my list that it has “strong potential” for wind, solar subsidies. We have been saying more generally that and wave power, which presumably means that it has we want to work in partnership with Brazil in not developed them properly, but Brazil clearly has all international institutions because we have common those advantages. It also produces a huge amount of interests, and want to consider how it might work with biofuel, so it is in a position where it is meeting a us in the IEF.5 We will be keen to build that very high amount of its existing energy needs from partnership with Brazil, and we have stepped up that renewable sources. At the same time, it has the partnership on energy with a high-level energy potential to be a major world oil power. dialogue, trying to address some of the issues Again, I am told that by 2015, it is possible that Brazil collectively. We want the growth in oil production to would be in a position where it is the sixth biggest be an opportunity that we seize on early; it is not just producer of oil after—get this—Saudi Arabia, Iran, an opportunity for business, but from the point of Iraq, Kuwait, and the United Arab Emirates. It would view of energy security, we want to work with all be the largest power in the world outside that hub in multilateral institutions that cover oil. the Middle East, which would change the way that people perceive Brazil. That would change Brazil’s Q160 Mr Baron: On the OPEC front, there is a view economy, but of course, the difficulty then is how that that Brazil is perhaps trying to increase its room for transition could be made in a way that supports much- manoeuvre. As the level of the oil price goes forever needed infrastructure development, education, and upwards, there is a need for OPEC members to other areas in which Brazil needs to improve in order balance their budgets. That gives the Brazilians a bit to move forward economically. It would provide a lot of leverage if they are outside OPEC when it comes, of opportunities for British businesses, which is perhaps, to influencing the oil price. That is perhaps a already the case with BG and BP. As I say, it also debate for another day. affects the balance of debate internally within Brazil, Minister, you mentioned that you would like to see in terms of how it meets its growing energy needs. British trade increase—I think you mentioned £4 billion from £2 billion. How was that figure arrived Q157 Mr Baron: I would not disagree with anything at? It seems to me that if you take the French or you have said, because that would change people’s German models for promoting trade overseas, they perceptions, but how do you think it would affect have had more success than we have, certainly in Brazil’s foreign policy? For example, why do you Latin America, for a variety of reasons. I do not think think that, to date, Brazil has refused to sign up to that is due only to historical or cultural links, but those OPEC? What is the logic behind that? countries have a closer working relationship between Mr Browne: I do not know. To be honest, it is not an 4 International Energy Agency area that I have read analysis on—the reasons why 5 International Energy Forum Ev 40 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life
Government and industry in promoting industry and If you ask a lot of businesses what globalisation winning exports. How will we catch up? How will we means to them, they say “China” or “Vietnam”. They double that figure, and how was the figure arrived at? look east; they do not look south-west. Quite a lot of Mr Browne: I am sure there are all kinds of clever businesses could do very well in Latin America, but calculations that arrive at the number being precisely have not particularly thought to expand there. In some doubled, rather than it being selected for more cases, that may be because the Americans got there arbitrary reasons. Let me make a wider point. A first or the market is already at a high degree of statistic that is often quoted—I have heard the Prime saturation, but in other cases it is just because the path Minister say it—is that Britain does more trade with has not been particularly well trodden by British Ireland than with China, India, Brazil and Russia businesses. When talking to other business people in combined. Everybody gasps at how astonishing that Britain, therefore, we do not tend to end up sparking is, but it does suggest that we are still in the foothills up a conversation about opportunities in Brazil or and at an early stage of globalisation. We tend to think other Latin American countries because the about what it is like to live in a globalised economy, conversation is all about what is happening in South but actually we are not in a fully globalised economy Korea, Thailand, Indonesia or wherever. at all. In 20 or 30 years’ time, people will look back We are keen on having an EU-Mercosur trade and think that it was an extraordinary delusion for us agreement, and there is value in general UKTI-style to think in 2011 that we were in a globalised economy. events. We had the Foreign Office so-called leadership Even though countries are obviously going to do more week about three weeks ago when our ambassadors trade in some areas with their immediate geographic and heads of mission from all round the world were neighbours, actual scope for trade with a country like back in London. As part of that, for example, one Brazil, which has 190 million people and is growing evening we had an event in the City of London to more strongly than countries in Europe, is very high. which all the Latin Americans were invited, along We can try to improve our trade position through a with the British ambassadors who had come home, number of means. Partly, we have to try to ensure that Latin American ambassadors here in London, and lots we win an overall values debate. I do not say that of businesses that are investing in Latin America. I there is hostility in Brazil to that, but Britain is one of am not saying that that, in itself, transforms our trade the leaders in the world in arguing for free trade and relationship, but I am not dismissive of those events. open markets. We even have difficulties sometimes They can add value, as well. We need to try to work with the United States in this discussion. Certainly across the piece. when the European Union is looking to negotiate trade To return to a point that I was making about an hour agreements, Britain tends to be at the forefront of ago, there are aspects of Britain’s offer that could arguing for more open markets and more free trade. become increasingly relevant and compelling to We need to make sure that that argument is Brazil. Probably the second most popular sport in intellectually won around the world, which is sadly Brazil after football is Formula 1 motor racing. I not the case at the moment. remember having this conversation with the Brazilian We need to make sure that the business environment Foreign Secretary. I said, “Isn’t it striking that most improves in Brazil. These are all general points, and of the famous European car brands are German and they would apply to Germans and Italians as well. The French, to an extent, but that nearly all the Formula 1 World Bank has rated Brazil as the 127th most easy teams are based in Britain?” A lot of the technical country in the world to do business in. The complaint expertise that I was using to illustrate that point is that you will hear when you are in Brazil is about the relevant to a country as it goes into that stage of practical difficulties of trying to do business, and some development. Brazil is, I am told, regarded as the most of that may be about lobbying for individual impressive country outside the G8 for scientific businesses and individual contracts. We should not innovation, and we have an increasing amount of forget, of course, the smaller businesses that are collaboration on scientific research. Service-based looking to expand; it is not just about the prestige industries will become more important—that is a type projects that leading politicians have photo ops with that Britain is strong at. There are lots of cultural- when they go to countries, but the smaller ones that educational links. It may well be that in addition to are not so immediately apparent. our specific targeted efforts, the Brazilian economy Affording attention to Brazil is important in terms of will start to become more compatible with what how we are perceived in Brazil, but I also think that Britain has to offer, so we will get a perfect coming- it is important in terms of how Brazil is perceived together of conscious efforts by the Government and here. The week after next, the Deputy Prime Minister the requirements of the Brazilians. is going to Brazil. I am going with him. Jeremy Hunt, the Culture Secretary, is going, as is David Willetts, Q161 Mr Baron: Do you accept that in the past, the Minister for Universities and Science. A number British companies trying to win business have had a of vice-chancellors and business people are going, as laissez-faire approach, and that we need a more co- well. The greatest value that I attach to that is the ordinated approach to bring some coherence? Mr same point as I made earlier: if you had a league table Armour of UKTI suggested that, and said that they of continents of the world, people in Britain—not just would try to make efforts in that direction. Is that the British Government—would, if they were honest something the FCO, in its somewhat limited capacity, with themselves, put Latin America bottom of the can encourage, and what improvements do you think table. it can make? Foreign Affairs Committee: Evidence Ev 41
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life
Mr Browne: I personally have some sympathy for that They are enthusiastic about the lessons that they can approach. Let me explain. Having a systematic co- learn from us about the Olympic Games in all kinds ordinated approach to trying to make sure that British of areas. businesses have an introduction into the market place, One must get away from just thinking of the Olympics being able to share with them our understanding of as a sporting event where people try to run as fast or business opportunities, but also a wider understanding jump as high as they can. In these terms, it is a about where their labour market is placed, where their massive business opportunity in all kinds of areas— skill shortages are, what the cultural barriers are to project management, design and security. Selling investment, and lobbying the Brazilians to try to millions of tickets on the internet for example throws address market access issues that may be particularly up all kinds of issues about cyber-security, banking difficult for British businesses—in all those areas, I and distribution systems and pricing mechanisms. I agree with the premise of your question. The only am sure that the media here can find areas where they thing that holds me back from signing up to it 100% feel that the system could be improved, but if you stop is that businesses are successful if they can produce to think about it, this is an event with multiple venues goods and services that people want to buy, at a price and we are selling literally millions of tickets over two they want to pay. I want Brazilians, and for that matter and a half weeks. Logistically, that is a very other people in the world, to buy British goods and complicated exercise, which is potentially prone to services because they’re the best goods and services fraud, for example, and to other abuses. We are available. We can lobby as much as we like, but if we sharing information in all kinds of areas, and they are don’t have products that people want to buy at prices learning from us. There are potential business they want to pay, they won’t buy them. opportunities that go way beyond thinking about it as There is an important role for a co-ordinated a sporting event. government approach, but I wouldn’t underestimate The Olympic park in east London is a great showcase the important role of innovative businesses coming up for British ingenuity in design and project with superior products to those offered by French or management. I showed the Brazilian Ambassador German businesses. around the park, and he seemed very impressed with Angus Lapsley: May I make three points? First, one the ideas that we had. We are working closely with bit of the strategy on Brazil, which is not secret, is the them at lots of different levels and will continue to do establishment of a high-level CEO forum of Brazilian so. Brazilians will see it in receptions a year before the and British business people working to address the games and no doubt there will be pictures in Brazilian barriers that might exist, and to raise awareness of the newspapers. It is a nice showcase for Britain in that opportunities that exist. Secondly, I am not way, but there is a much more detailed working responsible for UKTI’s resources around the region, relationship with the Brazilians, because they are but it is looking at its presence in Brazil, and whether taking over the games from us in 2016. there are more areas they should move into and more re-enforcement they should do. Thirdly, all this takes time. The British companies that do well in Brazil— Q163 Mike Gapes: May I ask briefly about the HSBC, BG and so on—have been at it for a long time, environmental issues? Brazil has made efforts to and have built up relationships. It is not like America tackle climate change. It is an important country where you can pitch up with a good idea and do because of the size of its forests and its sheer scale. business. You really have to work the Brazilian What are we doing to support Brazil in its efforts on system. climate change? Going back to what the Minister said earlier about Mr Browne: May I start by agreeing with the premise Brazil scoring badly as a place to do business, a lot of of your question? Again, I have rustled up some that is to do with the fact that it’s a place where it fascinating facts, including that the Amazon is larger takes time to build relationships, to get round the in square mileage than the EU. I do not know whether bureaucracy, and to work out the best way of working that tells you anything or whether you are interested, through local culture. I think we will work on that but it gives you a sense of scale. Certainly, the over a long period to get results. Brazilians regard their natural inheritance as one of the defining features of their country and are rightly Q162 Chair: Will we be using the Olympics to very keen to preserve and protect that inheritance. We promote trade between Britain and Brazil? Minister, work closely with them on that. you will remember that you gave evidence to us a few I am encouraged that President Rousseff is a keen months ago on the opportunities posed by the champion of pro-environmental, climate-change- Olympics. mitigating policies. We work through our embassy in Mr Browne: Yes. Brasília on projects and in areas where we think that Chair: Would you like to elaborate? we can be of value to the Brazilians, including the Mr Browne: If I had a gold medal for every time I energy aspects that Mr Baron discussed a few minutes talked to Brazilians about the Olympics, I would be ago. In terms of a manifestation of that, when I spoke in the Steven Redgrave category daily. The Olympics to our Climate Change Secretary about the Cancun are a big opportunity for us. The Brazilians are excited Summit, I was struck that he said that the closest to be hosting the Olympics and the 2014 football partnership he had was with the Brazilian. You might World Cup. They are the two main global sporting think that it would have been with another European. events, and the Brazilians are hosting them back to It suggests a positive expansion of our role in this back, for the first time in history, as far as I am aware. area. Ev 42 Foreign Affairs Committee: Evidence
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life
Q164 Mike Gapes: There has been a report in the seeing where we can help and support, and not about past 10 days about what they call a “crisis Cabinet” sending experts unless we are asked. being established as a result of a 27% increase in deforestation in the Amazon in one year, principally Q168 Sir John Stanley: Should not the Foreign in Mato Grosso, I think. How concerned are you about Office and the British Government as a whole be that? It has been suggested that there is a move in the doing much more to bring home to the British people Brazilian Parliament towards loosening the legislative at large the critical connection between preservation restrictions by moving down from 80% to 50% on the of the Brazilian rain forest and our own position here protection of the forests of the Amazon. Do we have in the UK? Is it not the case that very substantial costs a view on that? Are we making representations? What will be falling on British taxpayers and British do you think will happen? Is it clear that the Brazilian electricity consumers—are falling on them now—as a Parliament will go that way? If so, what are the result of the British Government’s targets to reduce implications? CO2 emissions? Those costs and the sacrifices made Mr Browne: Yes, we do have a view. Yes, we are by the British people will be shown to be absolutely concerned. Yes, we are making representations. My futile unless, first, China is weaned off its coal-fired understanding is that this is a live debate, which we power station programme and, secondly, the Brazilian are keen to influence—primarily, it is an internal rain forest is protected. Should that message not be debate within Brazil, although it has wider made much more clearly by the British Government? ramifications. Our understanding is that the President Mr Browne: This is a big subject. I feel that the is in a very strong or resolute position, which we Climate Change Secretary is best equipped to give approve of her being in. you a detailed answer, but let me make a few observations. Q165 Mike Gapes: Which is on this 80% to 50% I think that there is value in Britain demonstrating thing? Can you clarify? global leadership. We have almost 1% of the world’s Mr Browne: She favours Brazil continuing to meet population and account for about 2% of the world’s the more onerous end of the targets—the 80% carbon emissions, so it is true that 98% of the world’s reduction, rather than a less ambitious reduction. On a scale of how environmental someone is, she is on carbon is not emitted by us but, on the other hand, we the most environmental end of the scale, and we are are emitting more than double the amount per capita happy she is in that place. of the global average. There is a reasonably compelling case that we could do better and show Q166 Mike Gapes: We have been told by academics greater leadership, and that that would be and others that the percentage will be reduced from advantageous to us. The economies in the world that 80%, but the question is how far it will be reduced. I will be well equipped to prosper in 10, 15 or 20 years’ do not know whether that is true. time will not be those belching out large amounts of Vivien Life: That is not our understanding. The 80% black smoke but those which have got ahead of the is a domestic commitment, but Brazil has made game in being innovative and preserving energy. commitments in the UNFCCC6 for an overall I note, just this week, the German plans for reduction in carbon emissions, and its 80% target with reconciling their views on nuclear power and future regard to deforestation makes up 50% of its ability to energy requirements. There is a big gap there that it reduce emissions. So at the moment, Brazil is will need to fill with greater energy efficiency and bound—not legally bound, because we don’t have a more renewables. That is a potential opportunity for legally binding UNFCCC, but, given how Brazil it if it gets into areas where there is high demand in wants to position itself as a leading green country, it the future for more energy efficient products. It is is unlikely to want to retreat from the targets it is overtaking us in that regard, so we need to be mindful committed to in the UNFCCC. But, as the Minister of that. said, the recent figures are worrying. It is a politically China, of course, has a huge population. It argues, difficult thing for the President to deliver, given where rightly, that it emits far less per capita than the United the Parliament is. We will be doing all we can to States, but it is catching up in a way that should, and support Brazil, politically and technically, in does, give us cause for concern. Having said that, I delivering its commitments. think sometimes the British view of China, when it comes to renewable energy and the means for tackling Q167 Mike Gapes: When you say help, do we climate change, lacks appreciation of some of the actually send experts to give advice, or should we be measures that it has taken. I was very struck, when I listening to the Brazilians, given that it is their climate was on a train journey through China a few months and that they might have a better understanding of it ago, how virtually every house I went by had solar than we do? panelling on the roof, in a way that you would never Vivien Life: We let them ask us for what help they see on a train journey through Britain. There is quite want. We would not presume to send expertise that a high level of alertness to these issues in China. That wasn’t asked for, but we have this close relationship does not mean to say that more cannot be done, but it and partnership. When Caroline Spelman visited is not unequivocally in a place that we would Brazil, we talked about potential funding for policies disapprove of. to tackle deforestation and so on from the UK’s I also take your point about the Amazonian rain forest, climate finance. It is about talking to the Brazilians, which is why we make this point forcefully to the 6 United Nations Framework Convention on Climate Change Brazilians. I do not think that they are in the opposite Foreign Affairs Committee: Evidence Ev 43
8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life place from us, both because they share with us the then that may represent a reasonable step forward. wish to address concerns about climate change, but Brazil, of course, also grows huge amounts of food. It also for the reasons I mentioned about them rightly has the capacity to grow food way in excess of its feeling proud about their own natural inheritance. I own domestic requirements and already does so, but do not think that the Brazilians wish to degrade the it could grow a lot more still without clearing rain Amazonian rain forest, but it may well be that a whole forests in order to do it. So I would not automatically series of incremental, small measures taken by assume that the consequences of growing biofuels will individuals lead to an overall degradation, which is either be to ruin rain forest or to lead to Brazil failing not what the overall government policy would wish it to match its potential in terms of food production. to be. So what we need to do is ensure that the There is a risk in both those regards and you are right Brazilians have the systems and the continued resolve to highlight that risk. That is the risk that we need to to tackle a problem that we agree, with them, needs be mindful of. to be tackled. That is a long answer, but it is quite a Vivien Life: It would be wrong to set this up as the big subject. UK telling Brazil what its responsibilities are. It is something that Brazil is herself very conscious of. As Q169 Sir John Stanley: It is. I want to raise with international standards for what constitutes you just one other aspect of this. Minister, earlier on sustainable biofuels are being developed—not least by you referred, in answer to another question, to the way the EU—Brazil should be part of that debate about in which Brazil has become an absolute major in wanting to develop standards, because we believe that biofuels, as has the United States. Minister, would you Brazil’s biofuels are a lot more sustainable than some not agree that there are two huge downsides on elsewhere. So, again, it is an important issue that we biofuels? First, it is, of course, a spur to land clearance can address through our high-level energy dialogue. and potentially to deforestation, which is the very We can ensure that we have a mutual understanding thing that you want to stop happening in Brazil, as of this. We do see biofuels as an important part of the land is cleared for crop growing. Secondly, every bit energy mix if we are going to meet the carbon as important if not more important is the fact that, if emissions targets that we were talking about earlier. you devote land for growing crops which you are Chair: I thank Mr Lapsley, Mrs Life and yourself, going to pour into petrol tanks and motor vehicles and Minister, for coming along today. It is very much not enable people to have food, you then produce a appreciated. We are off to Brazil at the weekend and real spur to world food prices which hits the very, we go there much wiser than we would have done if very poorest people. Those are two really major you had not come. Thank you very much, indeed. downsides in the Brazilian march into biofuels. Is the Mr Browne: May I say quickly Chairman that I am British Government relaxed about that? Is the British genuinely pleased that you are going? It sends an Government trying to persuade the Brazilian important signal that the Committee is taking an government, for those reasons, to modify its rush into interest in Brazil. Certainly, a constant theme of my biofuels? What is the British Government’s position conversations in the Department and wherever I go is towards this? my desire to see greater attention given by British Mr Browne: Let me bring Vivien in, in a second. I public opinion and the British Parliament to Asia, think I would say that they are two potential Latin America and those parts of the world that are downsides, rather than automatic downsides. I accept evolving quickest. We should not just content that, if huge acreages of virgin rain forests are being ourselves with the more familiar set of countries that cleared in order to make way for growing biofuels, we have grown familiar with over recent decades. I that is taking two steps back before you take one step regard your interest as an entirely welcome and forward in terms of your contribution to addressing helpful part of that process. Have a good time. climate change. If, on the other hand, biofuels are Chair: Thank you. We appreciate the support given being grown on land that was previously left fallow, to us by the Foreign Office generally. cobber Pack: U PL: CWE1 [SE] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence
Written evidence from the Foreign and Commonwealth Office Summary Brazil has arrived as a global power. The Government is energetically working towards a step change in the UK-Brazil relationship, promoting national interests under both prosperity and security agendas. A sustained programme of Ministerial visits in both directions underpins this work. Brazil presents significant opportunities for the UK and UK companies, including in green growth, energy security, sports infrastructure, defence sales, and science and technology. Brazil is an increasingly influential voice in international fora, including the G20, the BRICS, the IMF, and in the UN, and the Government is engaging in closer consultation with Brazil on major foreign policy issues.
Canning Lecture and Emerging Powers “History teaches us that Britain has a track record of underestimating Latin America and neglecting its opportunities. It is this neglect that the current British government is determined to address.” 1. In November 2010, William Hague was the first Foreign Secretary to deliver the Canning Lecture, on the theme of “Britain and Latin America: historic friends, future partners”. He set out Britain’s strong historical association with the independence movements of Latin America, including negotiating terms on Brazil’s behalf with Portugal, and the many reasons why Britain should engage more closely with the region today. After a prolonged period in which the UK had considered Latin America outside of its sphere of influence and neglected opportunities there, the Foreign Secretary announced an end to strategic withdrawal from the region, and a determination to think afresh about Latin America. 2. Brazil has a particular place within this reinvigorated approach to Latin America. It is in the top tier of the Emerging Powers. It is now the 7th largest economy in the world, and due to be the 5th within the next decade. It has a population of 200 million people, and a very favourable demographic profile for the next 30 years. But UK trade with Brazil represents less than half of that with Denmark. 3. Brazil and the rest of Latin America were an early focus of effort for the Government, and the Foreign Secretary’s first multilateral appearance was at the EU Summit with Latin American and Caribbean countries (EU-LAC), in Madrid. Since May 2010, Vince Cable, Gerald Howarth, Caroline Spelman and Baroness Pauline Neville Jones have carried out Ministerial visits to Brazil. Minister Jeremy Browne will visit Brazil in May. The Deputy Prime Minister will lead a Ministerial and business delegation to Brazil in June. The Foreign Secretary unfortunately had to postpone a visit to Brazil planned for April, due to the Libya crisis. 4. Brazil was on the agenda of the first National Security Council sub-committee on the Emerging Powers (NSC(EP)), along with China. The sub-committee agreed a more strategic, cross-Whitehall approach to Brazil, with an ambitious agenda that aimed to deliver a step change in the relationship by 2015. This is intended to maximise UK benefits from Brazil’s growth and prosperity, while developing an enhanced security relationship with Brazil. Key objectives by 2015 of this approach include: — Doubling UK exports to Brazil from £2Ð4 billion. — UK to become one of the top 10 recipients of Brazilian FDI. — UK companies win major contracts for World Cup 2014 and Rio 2016 Olympics. — Sharp increase in UK-Brazil research and development collaboration, particularly in high-tech spin-outs and SMEs. — Build on common support for free trade to deliver an ambitious EU-Mercosul FTA, and progress towards a successful Doha round. — London 2012 increases positive perceptions of the UK in Brazil, 50% more Brazilian tourists visiting UK per year. — Closer cooperation with Brazil on climate change, biodiversity and deforestation. — UK-Brazil cooperation on development tackles poverty in other regions, especially Africa. — Greater UK-Brazil collaboration on international security challenges, on the UN Security Council and in other bodies.
UK-Brazil Bilateral Relations 5. The bilateral relationship between the UK and Brazil is good, but under-developed. Strengthening ties with Brazil will help to promote a range of UK interests. Brazil is a rising economic force, has a growing international voice, is an environmental superpower and a development success story. Brazil is already courted by other countries seeking to share in its growth. In 2010 , the UK was Brazil’s 13th largest trading partner, after Italy, France and the Netherlands. 6. There is high regard in Brazil for UK expertise in science, energy, climate change, counter-narcotics, development work, the military, public-sector management and reform, public order and foreign policy. Brazil cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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wants access to UK capital, technology, science, universities and knowledge of how to run major sporting events. Brazil increasingly wants to exchange views on domestic policies (fiscal, health, drugs, energy, and defence). 7. The UK is represented in Brazil with an Embassy in the capital Brasília, and Consulates in São Paulo (focused on commercial work generally) and Rio de Janeiro (focused on consular work, the energy sector, defence sales and the opportunities arising from the London-Rio Olympics and the World Cup in Brazil). There are also small commercial offices in Recife and Porto Alegre. There are currently 28 UK-based staff in the network, and 233 locally-engaged staff (including a large guard force). 8. The adjacent hosting of the summer Olympics in London (2012) and Rio de Janeiro (2016) provides an important point of contact in the relationship. Brazilian organisers at the state and federal level have a keen interest in seeing firsthand how the UK has prepared itself, which in turn provides significant opportunities for UK businesses involved in London 2012. The Football World Cup in 2014 will be held in Brazil, with attendant challenges in infrastructure projects and public security. It is estimated that Brazil will spend £17 billion in sports-related infrastructure in the next five years.
President Dilma Rousseff 9. President Rousseff took office in January 2011, taking over from the popular and charismatic Lula (Lula Ignacio da Silva). She succeeded in the Presidential election with Lula’s personal endorsement, having gained prominence as his Chief of Staff, and never having previously run for any elected office. 10. President Rousseff has overseen a smooth transition, retaining a number of Ministers and staff in key positions, and emphasising continuity particularly in economic policy. She has thus far lived up to her reputation as an efficient administrator, handling the crisis of massive fatal flooding and landslides in Rio de Janeiro with an effective, hands-on approach. It is helpful that the economy seems to continue in its good health—growth was 7.5% in 2010, and forecast at 4.5% for 2011. Since taking office her approval rating has climbed to its current level of 73%.
Trade 11. Brazil has a diverse economy, with industrial products making up the majority of exports, and a strong domestic services sector. It is an agricultural and food security superpower—producing and/or exporting more sugar, soya, chicken, beef, coffee and bioethanol than any other country—with considerable scope for further environmentally sustainable growth. Brazil has the most-cited science base outside the G8. Its research institutes make Brazil a world leader in agricultural research, as well as bio-science, although its ability to translate this into commercial goods is not yet developed. 12. Brazil remains a balanced but relatively closed economy: exports make up less than 20% of GDP. Economic growth is primarily domestically driven by consumption (partly fuelled by comprehensive social programmes), more in line with developed economies than the other BRICs. A growing middle class provides a potential market for goods and services the UK can offer. Brazil weathered the global economic crisis better than Europe and North America. 13. Brazil is committed to greater world trade liberalisation, including successful conclusion of the Doha round. Brazil’s most important trading partners are the EU (22% of trade), China, the US and Argentina (in that order). It is strongly in favour of an EU-MERCOSUL agreement, which could open up further Brazil’s markets. 14. UKTI has an active and ambitious presence in Brazil. In the last three years it has seen enquiries from UK companies increase by 500%. There was a 23% year on year increase in UK goods exported to Brazil in 2010. UK companies often comment on the challenges of working in Brazil, including complicated tax systems, restrictive labour laws, and general bureaucracy. The World Bank ranks Brazil 128th in the world for ease of doing business. But the size of the market, with growing disposable income, and profitability of operations, continue to attract UK companies in ever greater numbers. 15. UKTI is also working on inward investment, given Brazil’s and Brazilian companies’ increasing activity overseas. The UK currently ranks only 26th as a destination for Brazilian investment according to available statistics, although anecdotally it is clear that inward investment is higher than that. The true level may be masked by the financial flows sometimes through third countries. It was a positive sign that the Brazilian National Development Bank (BNDES), which has three times the capital reserves of the World Bank, chose London as the site of its first international office outside the region. The science and technology sector in the UK, especially spin-outs from UK universities, is of particular interest for Brazilian investors.
Environment 16. Brazil is home to the world’s largest tract of virgin rainforest—the same size as the EU—a fifth of its freshwater and a third of its biodiversity. This, combined with its achievements in reducing deforestation (rates down 64% in five years), its clean energy matrix (48% from renewables) and advanced and sustainable biofuels (94% of new cars can run on sugarcane-derived ethanol), means it has a real chance to make the transition to a low-carbon, green economy a reality. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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17. Brazil has adopted ambitious national targets to reduce carbon emissions, especially through reducing deforestation by 80%: they are on track to achieve these. The UK is a strong partner on the range of environmental issues—biodiversity, sustainability, climate change—as evidenced by the recent visit of the Secretary of State for Environment, Food and Rural Affairs. There was exemplary Brazil/UK co-operation at the Nagoya biodiversity and Cancun climate change meetings in 2010.
Energy Security 18. Brazil is expected to become a major oil exporter over the next decade, following the discovery of up to 50 billion barrels of off-shore “pre-salt” oil. The pace of production may depend on the supply chain. Petrobras plans investments of £230 billion up to and beyond 2014. UK companies such as BG Group (the top foreign investor in the sector) are committed to this opportunity. Shell and BP have recently made major investments in ethanol production. 19. This transition towards oil exports could conceivably threaten Brazil’s strong renewable energy credentials, though that seems unlikely given the central role of renewable energy in the economy. President Rousseff has taken a personal interest in the management of revenues from the pre-salt oil, and looked to the experience of, for example, Norway for lessons on how to manage such a sovereign wealth fund. 20. The UK and Brazil High-Level Energy Dialogue was launched in March 2011, covering oil and gas, renewables, nuclear and energy efficiency. UK companies are major partners in the Brazilian oil and gas sector. Shell is currently the largest foreign producer.
Brazil as an international actor 21. While Brazil dominates South America, it is cautious not to take too strong a leadership position, for fear of creating resentment. Brazil increasingly sees itself as having a global, rather than regional role. Former President Lula carefully maintained good relations with President Chavez of Venezuela and the rest of the ALBA countries, even while pursuing very different economic policies. The relationship with Argentina continues to be important. 22. Brazil’s approach to foreign policy is driven by support for multilateralism, a rules-based international system and respect for other countries’ sovereignty. Brazil considers the current multilateral system designed in the developed world’s image and not reflecting the reality of the 21st Century. The rise of the G20 has boosted their hopes of reshaping such global institutions. Brazil wants the G20 to be the pre-eminent forum for economic matters beyond the global crisis. 23. Brazil believes it has the right to a place at the senior table, including a permanent seat at the UN Security Council (it is now in the second year of a non-permanent seat). The UK supports this aspiration, as part of a reformed Security Council. 24. Brazil is a keen member of the BRIC, BASIC and IBSA informal groupings, seeing them as valuable to Brazilian interests and a lever to hasten reform of the world institutions. It will continue to be active and influential in these groupings, and new ones which might emerge on other issues. Brazil is also a leading voice on development and is a keen advocate for the rights of developing countries, particularly in relation to intellectual property rights. 25. In the summer of 2010, President Lula and Prime Minister Erdogan of Turkey brokered a “deal” with President Ahmedinejad on nuclear enrichment which was then rejected by the E3 + 3. Brazil abstained on UNSCR 1973 on Libya. President Rousseff has changed Brazilian policy on human rights, as evidenced by the Brazilian vote in favour of a Special Rapporteur on Human Rights for Iran in March 2011. 26. On disarmament and non-proliferation, Brazil is bound by its constitution and a Latin American Nuclear Free Treaty (Treaty of Tlatelolco) not to develop a nuclear weapon. It had a fledgling secret nuclear weapons programme under the military dictatorship. There is some support from nationalists and old-left ideologues for Brazil to become a nuclear power strengthened by unease over the perceived unfairness of the NPT (which Brazil signed in 1998) but no likelihood of this view becoming Brazilian policy. Brazil is a member of the New Agenda Coalition, generally constructive, and has influence with some (Egypt, Syria), who hold different views. In its current Defence Strategy it rules out signing the Additional Protocol without progress on disarmament. Brazil maintains that nuclear weapons states have not delivered on their side of the bargain. Brazil has a bilateral nuclear agreement with Argentina which it claims provides sufficient safeguards.
Security and Criminality 27. With growing affluence, Brazil has become a major consumer country of cocaine, second only to the US. It is a transit point for cocaine trafficked to Europe and the US. It has forty major sea ports handling container traffic. Brazil is one of seven priority countries for the UK’s counter narcotics work in Latin America. Interagency operational cooperation between SOCA and its Brazilian counterparts has proved crucial in disrupting cocaine routes. The UK has started a strategic dialogue with Brazil on drugs policy with a view to agreeing an MOU. Brazil has taken some steps to fill the void left by the US DEA following its expulsion from Bolivia, and the UK is encouraging it to do more. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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28. Public security remains one of the major challenges facing Brazil today, with high levels of violent crime in many of the major cities. Efforts to address these problems have been given additional impetus by the 2014 World Cup and 2016 Rio Summer Olympics. Over recent months, the impressive process of pacification of Rio’s favelas has gathered pace, with widespread domestic support. 29. Brazil's broader security posture has been traditionally one of territorial defence. Patrolling Brazil’s large borders dominates military tasking, even though there are no credible threats to Brazilian territorial integrity. Brazil launched its first National Defence Strategy in December 2008. The Strategy outlines further areas for focus including: reorganisation, strengthening the MOD; boosting the Brazilian arms industry; protecting natural resources (oil and Amazon); increasing peacekeeping; and promoting social cohesion. 30. Peacekeeping has played a larger role in Brazil’s security profile in recent years, not least to bolster Brazil's credibility as a prospective permanent UNSC member. Brazil is the 12th largest contributor of personnel to UN peacekeeping and leads the UN mission (MINUSTAH) in Haiti with 2,200 peacekeepers. It has previously deployed with UN operations in Angola and East Timor and is considering deploying with smaller missions in Africa and the Middle East. Only professional soldiers can serve outside Brazil. Brazil will stick to missions that have the full consent of host countries, because of their commitment to national sovereignty and non-interference. Brazil does not yet have the capability or structures in place to deploy civilian forces alongside military although there is political will to deliver development with security. 31. Defence procurement decisions are based on a technical evaluation of options by the relevant armed force (the joint requirement assessment process is some way off) followed by a political decision. In defence procurement, like so many other areas, Brazil’s wish is to master the technology it buys rather than buy the most up-to-date equipment off the shelf. Fears of foreigners withdrawing their support for defence equipment after procurement mean that technology transfer remains an essential condition of defence sales to Brazil. 32. Brazil has supported Argentina’s claims to the Falkland Islands since the 1830s, and since 2010 South Georgia and the South Sandwich Islands. 28 December 2010, the British Ambassador was informed of the decision to refuse entry to HMS CLYDE and HMS GLOUCESTER, which had applied for diplomatic clearance to enter Rio de Janeiro. HMG has expressed its disappointment and is discussing with Brazil how to handle these visits in the future.
Development 33. Brazil’s record of 15 years of macro-economic stabilisation followed by the universalisation of social protection programmes has lessons for many countries. It is on track to achieve almost all MDGs. Its “social technology” includes a famously successful conditional cash transfer scheme “Bolsa Familia”, as well as AIDS treatment, vaccination and infant health schemes. Brazil has progressive policies and institutions (for example on family farming, food security and biofuels) and experience of decentralising development, encouraging local responsibility for social progress, with direct accountability to local people. These are experiences valuable to others, including through Brazil’s existing ‘South-South’ dialogues and trilateral projects such as with the UK in Kenya. Brazil, under the MINUSTAH mandate, continues to lead reconstruction and service delivery efforts in Haiti (eg health, water and sanitation). 34. Brazil’s record on development domestically, and credibility as an emerging southern power, gives it a natural advantage as a development actor, though it is cautious about forcing Brazilian solutions on developing countries. Brazilian aid resources are rising rapidly (currently comparable to Finland). But to play a greater international development role Brazil needs to move beyond familiar instruments (technology transfer) and familiar partners (Lusophone Africa, regional neighbours). Additionally, Brazil needs to address institutional and operational hurdles to respond to its growing demand for development cooperation. It has a stated commitment to increase investment to Low-Income Countries and, although still far behind China and India, could emerge as an important partner for enhancing quality (eg social inclusion, clean technology) and rate of growth in Africa. 35. Brazil has become a partner of choice for infrastructure construction projects in Africa (particularly Lusophone). The Brazilian National Development Bank (BNDES) has played a vital role in facilitating and subsidising Brazilian companies (providing from 2008ÐQ1 2010 £2 billion in commercial loans) to bid for international infrastructure and commercial projects, particularly in Africa and South America.
Conclusion 36. The UK-Brazil bilateral relationship is improving, though from a relatively low base. Brazil’s economic trajectory presents significant opportunities for UK companies, especially in a burgeoning middle class. The Olympics provide a particular point of contact, and are helping to open the door to increased numbers of visitors in both directions. The UK has a number of areas of expertise that are particularly valuable to Brazil as it continues its development, including in financial services, public administration, security, energy security, science and foreign policy. The Government is committed to exploiting these opportunities, and delivering a step change in the relationship. 19 April 2011 cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence from the Embassy of Brazil Brazil Some key figures — Total area: 8,514,877 sq km. (5th) (3,287,597 sq mi) — Population: 190,732,694 (2010) — Population density: 22/sq km — GDP (PPP): $ 2,181 trillion (IMF Economic Outlook 2010) — GDP/per capita (PPP): $ 11,289 (IMF Economic Outlook 2010)
United Nations Millennium Development Goals 1. The Brazilian social agenda—composed of multiple universal policies, as well as initiatives aimed specifically at the most vulnerable population groups—has produced a major transformation in the country. No doubt, still a long road before the regional and social disparities that were built over centuries can be permanently overcome. Yet, the core component of the country’s development policy—one which reconciles production growth with a more equitable income distribution and opportunities—has proved effective in addressing this challenge. 2. The Millennium Development Goals have emerged as important signposts of this policy. They provide a major contribution to the assessment of public policies, federative partnerships, and social mobilization efforts. And, most importantly, they encompass an integrated vision of development based on social justice.
MDG 1: Eradicate Extreme Poverty and Hunger 3. In regard to extreme poverty, Brazil’s original goal was to reduce until 2015 the overall level to one- fourth of that registered in 1990. Current projections for extreme poverty reveal that the goal was already achieved in 2007 and exceeded in 2008, when the poverty rate registered 4.8%, less than one-fifth the 1990 level of 25.6%. 4. Brazil’s goal is to eradicate hunger by 2015. In 1996, 4.2% of Brazilian children between the ages of zero and four years fell below the average weight for age. In 2006, that percentage had fallen to 1.8%. This figure, which lies well below the 2.3% level registered within the reference population, that is among healthy and well-fed children, would indicate that the risk of children consuming an insufficient quantity of calories and proteins is marginal.
MDG 2: Achieve Universal Primary Education 5. 95% of the Brazilian population under the age of 18 is enrolled in state or private schools. A key remaining challenge is to ensure that all young Brazilians complete their elementary schooling, which, up to 2009, corresponded to the compulsory education requirement for all Brazilian citizens. 6. Significant progress in order to ensure that this goal is achieved by 2015 has been made through government measures to expand the access to elementary education, including the establishment of the National Elementary Education Development and Teaching Enhancement Fund (FUNDEB), through which financial resources are allocated to all educational levels and modalities, and the implementation of the Education Development Plan (PDE).
MDG 3: Promote Gender Equality and Empower Women 7. An important step in the promotion of gender equality was taken last year, when a woman—Ms. Dilma Rousseff—was elected President for the first time in the country’s history. Notwithstanding this, gender equality and women’s empowerment remain distant goals in the Brazilian political scenario: 9% of Parliament Members are women. 8. The United Nations goal of eliminating gender inequality in education is not a crucial issue in Brazil, due to the fact that educational indicators for girls surpass those registered for boys.
MDG 4: Reduce Child Mortality 9. In 2008, the child mortality rate in Brazil stood at 22.8 per 1,000 live births. From 1990, the base year for measuring progress on the MDG, through 2008, child mortality rates were reduced on average by 58% at the national level. 10. Based on the target set out in this MDG, the child mortality rate should be reduced to 17.9 deaths per 1,000 live births by 2015. Assuming current trends continue, Brazil will achieve this target before 2015. The fact that Brazil is on track to achieve this target is supported by an assessment of the MDGs in 68 priority countries in 2008. This evaluation showed that Brazil displays the second largest reduction in infant/child cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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mortality among the nations examined, and that it is one of the 16 countries capable of achieving the proposed target.
MDG 5: Improve Maternal Health 11. MDG 5 aims to reduce maternal mortality by three-fourths from 1990 to 2015. In 1990, the adjusted MMR (Maternal Mortality Rate) was 140 deaths per 100,000 live births, while in 2007 the figure had fallen to 75 deaths per 100,000 live births, a reduction of approximately 50%. To achieve MDG 5, Brazil must ensure an MMR equal to or less than 35 deaths per 100,000 live births by 2015.
MDG 6: Combat HIV/AIDS, Malaria, and Other Diseases 12. HIV/AIDS—Estimates indicate that there are 630,000 people living with HIV/AIDS in the country. The prevalence rate of infection among the general population 15Ð49 years is 0.61%; 0.41% among women and 0.82% among men and has remained stable since 2000. 13. The universal access to free antiretroviral therapy (ART) in the public health system established by the Federal Government in 1996 led to better and longer survival for HIV/AIDS patients as well as to a reduction in the number of hospitalizations, which decreased by 82% over the period 1997Ð2007. 14. TUBERCULOSIS—Since 2004 the incidence rate of tuberculosis has declined in Brazil. In 2008 the rate was 37 cases per 100,000 inhabitants. Decentralization and expansion of control actions that have been integrated into Primary Care, associated with a set of actions undertaken by states and municipalities, are responsible for the reduction in mortality rates. 15. MALARIA—The Amazon, which accounted for 99.8% of all cases in Brazil, is a region of immense geographic extension and difficult access for health services. Malaria rates in the Amazon region have fallen since 2006, associated with the large expansion of the healthcare network. During the period of 2000Ð08, the number of hospitalizations has fallen from 20,830 to 3,647, representing a decrease of 82.5%; the mortality rate from 1.10 deaths per 100,000 inhabitants to 0.23, representing a decrease of 75.8%, and the fatality rate from 0.04 to 0.02 deaths per 100 cases of malaria, representing a decrease of 50%.
MDG 7: Ensure Environmental Sustainability 16. The seventh and broadest MDG refers to ensuring environmental sustainability. To achieve the objective, targets aimed at reversing biodiversity loss, reducing the proportion of the global population without access to drinking water and basic sanitation, and improving the conditions of life of slum dwellers were established. 17. A full 61% of Brazilian territory is covered by forest (5.2 million km2), 2/3 of which is located in the Amazon biome. Deforestation in the region has been subject to ongoing monitoring by the Brazilian government. After reaching its peak levels in 1994Ð95 (29,000 km2), deforestation in the Legal Brazilian Amazon fell in 2009Ð10 (6,541 km2) to its lowest levels since official tracking efforts began. Recently, the country launched systematic deforestation tracking measures in biomes located outside the Amazon, beginning with the Brazilian Savanna Biome (“Cerrado”), in the 2002Ð08 period. 18. Brazil’s energy mix is clean. A total of 45% of the country’s internal energy consumption derives from renewable sources, resulting in CO2 emission rates from fossil fuels of 1.88 tons per inhabitant, less than half the global average (4.38). Deforestation continues to represent the elementary source of Brazilian CO2 emissions, 76.3% of which stem from changes in land and forest use primarily in the Amazon and Savanna regions. In 2005, CO2 emissions reached 1.57 billion tons, 69% greater than the level registered in 1990. The country reduced its CFC consumption from 10,000 tons ODP (Ozone Depletion Potential) in 1995 to 290 tons ODP in 2008 through fulfillment of the 2010 goal established under the Montreal Protocol for the complete elimination of CFC. 19. The establishment of Conservation Units (CUs) represents an underlying pillar of Brazil’s strategy to protect biodiversity. From 2002 through 2009, total protected area increased by 69%. There were 923 CUs in 2009, corresponding to 17.3% of Brazil’s continental territory, the bulk concentrated in the Amazon biome. 20. In relation to basic sanitation, Brazil has achieved the goal of reducing the proportion of the population in urban areas without access to drinking water by half, with approximately 91.6% of the population served by piped water networks in 2008, an increase of nearly 10% in relation to 1992. Although basic sanitation service has been significantly expanded, it lags far behind the delivery of drinking water, although 80.5% of the urban population currently has access to sewage systems or septic tanks, representing a 14% increase against 1992. Disparities in the access to basic sanitation by different socioeconomic groups, between urban and rural areas, and among the major regions remain acute, notwithstanding the progress achieved. 21. Brazil has also witnessed a substantial improvement in living conditions. The proportion of urban dwellers with adequate housing conditions rose from 50.7% in 1992 to 65.7% in 2008. However, 54.5 million urban residents continue to suffer from inadequate housing conditions. Similarly, the access to shelter remains highly unequal between regions and socioeconomic groups. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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MDG 8: Develop a Global Partnership for Development 22. In recent years, the Brazilian government has undertaken a broad reorganization process aimed at more effectively adapting its cooperation initiatives to the country’s foreign policy priorities and expanding external responsibilities. 23. In general terms, Brazil is active on two fronts. First, it has effectively and purposefully collaborated to build an international agenda for development and expanded its participation in international organizations and programs through proposals and negotiations aimed at effecting changes in the current rules of global governance. It has actively contributed in international forums and through coordinated efforts with other countries to build a less asymmetrical world order. Second, the country has expanded its participation in a multiplicity of cooperation actions with developing countries, in particular Central American and African States. 24. Several Brazilian government measures aimed at fulfilling MDG 8 could be mentioned. Sustained economic growth, reduced external vulnerability, political stability, and enhanced social policies have allowed the country to chart a more pro-active course in the international arena based on the exchange of successful development knowledge and experiences. 25. Brazil is fast becoming one of the world’s biggest providers of help to poor countries. According to “The Economist”,1 the value of all Brazilian development aid broadly defined reaches US$ 4 billion a year. The amount is similar to those from traditional donors such as Sweden and Canada.
United Nations Security Council Reform 26. Brazil, jointly with Germany, India, and Japan (the G4 countries), as well as other like-minded Member States of the United Nations, have long been expressing a strong desire to pursue UN Security Council reform. 27. Brazil understands that Security Council reform is a necessary step to ensure that the United Nations continue to be relevant. 28. There is an almost unanimous view among Member States that the Security Council must be enlarged in order to both better reflect present political realities and to make the organization more representative, legitimate, efficient and effective. 29. Consistent and continuous participation of developing countries as permanent members is vital in order to award legitimacy and efficacy to the Security Council. 30. The ongoing discussions on the UN Security Council reform are gaining new dynamism following the submission of the draft text-based negotiation by the facilitator. 31. The negotiation text that the facilitator submitted has demonstrated that an enlargement with two categories of members and a greater participation of developing countries enjoys broad support of the majority. 32. The main challenge for G4 at the United Nations Assembly General will be to use the support of 140 countries given in favour of the text-based negotiation in order to make a resolution proposal feasible and to ensure that it is approved. 33. Since 2005, the United Kingdom has explicitly supported Brazil as a permanent member of an enlarged UNSC.
Environment 34. In the distant past, 9.8% of the primeval forests of the world were situated in the Brazilian territory. Since then, over 75% of primeval forests in the world have disappeared, owing to human intervention. The balance has shifted: Brazil currently holds 28.3%. Europe, not including Russia, once held over 7% of the world’s forests. Currently, there are only 0.1% of the primeval forests in Europe.2 35. Brazil is one of the countries that has destroyed its forests the least. Of its original coverage, Brazil retained almost 70%. In Europe, that figure is 0.3%. The greatest paradox is that, instead of being recognized for its conservation history and its present efforts for protecting and maintaining its original forest cover, Brazil is actually severely criticized by some of the deforestation champions, who deprived themselves from their own forests a long time ago. 36. The Government of Brazil is committed to sustainable development in the social, economic and environmental aspects. 37. Over the past few years, Brazil refuted the common sense notion that economic development is always accompanied by increased greenhouse gas emissions. In 2010, the Brazilian GDP grew over 7.5%. In the last decade, extreme poverty in Brazil has been reduced by 70%. In the same period, deforestation indices dropped 1 15 July 2010. 2 Source: EMBRAPA Satellite Monitoring Centre, “The World’s Forest Evolution Research”—Embrapa—is the acronym for “Empresa Brasileira de Pesquisa Agropecuária”—the Brazilian Agricultural Research Corporation (http://www.embrapa.br/ english). cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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by over 75% and have never been as low. The reduction in emissions caused by deforestation over the past five years means that Brazil has made very significant contribution to the mitigation of greenhouse gas emissions to the world. 38. The Brazilian government established a voluntary economic target to reduce emissions by between 36% and 38.9% until 2020, using the 2005 data as reference. This target has been included in the Brazilian Climate Change Policy and has been approved by the Congress. 39. Brazil attaches great importance to holding the United Nations Conference on Sustainable Development (Rio+20, 4Ð6 June 2012), both as an assessment instrument for the results achieved since the United Nations Conference on Environment and Development (RioÐ92) and as an opportunity for debating new challenges and issues concerning sustainable development.
Trade and Investment 40. Total trade between the United Kingdom and Brazil was 22.5% greater in 2010 than in 2009, according to data from HM Revenue & Customs. 41. UK imports from Brazil totalled £3.7 billion (22% up on 2009). Significant among them were gold (in semi-manufactured forms, for non-monetary use), aircraft (33.1% up on 2009), iron ore (80.3%), crude petroleum oils (12.8%), soybeans, raw sugarcane (307.2%), bovine meat preparations (4.9%), paper and pulp (62.8%), machinery and mechanical appliances (27.1%), and leather footwear. 42. UK exports to Brazil totalled £2.1 billion (23.2% up on 2009), centred on industrial and capital goods, with a heavy emphasis on the pharmaceutical and chemical industries (such as pesticides, chlorides as medicinal products), machinery, motor vehicles, crude petroleum oils, electrical instruments and appliances, and whisky. 43. As the UK’s overall imports increased by 14.4%, the 22% rise in imports from Brazil represented a faster-than-average rate of growth, surpassing that of imports from major markets such as the United States (8.6%), Australia (17.1%), Russia (17.7%), Japan (18.9%), and China (22.1%), and from EU partners such as Ireland (4%), Spain (8.6%), France (8.7%), Italy, Germany and Belgium (all 13.7%) and the Netherlands (20%). 44. In 2010 Brazil was the 24th most important country for UK imports and the 27th for UK exports, compared to 32nd and 33rd respectively in 2005. 45. The following Brazilian companies have recently invested in the UK: Ambev (whose merger with Belgium’s Interbrew formed Imbev), BRF-Brazil Foods, Marfrig Group (meat) and JBS-Friboi Group (meat). 46. An increasing number of Brazilian companies are represented in the British market, such as Tupy Fundições Ltda (foundry), WEG (electric motors), Stefanini (IT), Banco do Brasil (banking), H. Stern (jewellery), Santista Têxtil (textiles), Boticário (cosmetics), Odebrecht (construction) and Petrobras (oil and gas). 47. British companies in Brazil, in terms of investment, include Shell, Arcelor Mittal Brasil, GSK, Souza Cruz, and Unilever. In 2009, according to Brazil’s Central Bank, the UK was the 10th largest investor in Brazil. 48. Other important British investments in the Brazilian market were undertaken by British Gas, which announced its intention to invest US$ 20 billion over the next few years, and Wellstream, which committed US$ 60 million to manufacturing pipes for offshore oil production. As for future investments, one of the major initiatives is by Ferrous Resources, which by 2016 will invest around US$ 4.6 billion in the construction of a new iron and steel plant and the development of five mines in the state of Minas Gerais. 49. More than half of British investment in Brazil in 2009 was in multiple banks (59%, or US$ 613 million). Machines and equipment manufactured for oil prospection and extraction (US$ 87 million) and other metal ore mining (US$ 64.5 million) also received significant amounts. According to Brazil’s Central Bank, UK direct investments into Brazil increased from US$ 153 million in 2005 to US$ 1 billion in 2010. 50. The Joint Economic and Trade Committee (JETCO), established during President Lula’s state visit to the UK in March 2006, has proven to be an important bilateral mechanism to promote UK-Brazil trade and investments. JETCO’s 5th meeting took place in São Paulo in August 2010, when the two sides agreed that future discussions would focus on six major topics: Infrastructure & Energy, Sports Co-operation (including the 2014 World Cup and 2016 Olympics), Innovation & Competitiveness, Creative Industries, Training and Capacity-Building, and Healthcare. Working groups composed of government and private sector representatives have been established to consider each of these specific areas. 51. A Brazil-UK CEO Forum, composed of around 10 companies on each side, has been created to foster greater co-operation between the two countries’ private sectors.
New business opportunities 52. In 2010, Brazil recorded GDP growth of 7.5%. For 15 years the country has been reaping the benefits of a development model built on the interlocking pillars of political and monetary stability, inflation-targeting, a floating exchange rate, fiscal responsibility, and social inclusion. Last year, foreign direct investment rose by 87% in relation to 2009, reaching a record high of US$ 48.5 billion. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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53. Energy and infrastructure are attracting major foreign investment. Brazil has made great strides in increasing its total energy production, particularly ethanol and oil. Increasing oil production has been a long- term goal of the Brazilian government and the recent discoveries of huge “pre-salt” offshore deposits could transform Brazil into one of the biggest producers in the world. There are opportunities for foreign investors in exploration and in the supply of services and equipment. Due to national content policy, the best way for foreign companies to participate is to open a subsidiary in Brazil and/or to enter into a joint venture with local companies. The opening of a Petrobras office in London has helped to identify British companies that could potentially take part in the Brazilian oil and gas supply chain, and also to establish partnerships between Petrobras and research institutions. 54. Under the Growth Acceleration Programme (PAC) there are many projects which represent excellent opportunities for foreign investors and suppliers of goods, services and technologies. The second phase of the programme, launched in March 2010, aims to invest up to US$ 571 billion between 2011Ð14 and a further US$ 376 billion after 2014. The programme is focused on logistics, energy, urban infrastructure, housing, health, and public safety. 55. According to the Brazilian Development Bank (BNDES), total investment in Brazil’s industrial sector in the period 2010Ð13 will be US$ 335 billion. Oil and gas will lead the way with US$ 211 billion, followed by the mining (US$ 32.2 billion), steel (US$ 31.6 billion), petrochemical (US$ 21 billion), automobile (US$ 20 billion), electrical and electronics (US$ 13 billion), and paper and pulp (US$ 12 billion) sectors, all of which will present huge investment opportunities for foreign companies.
Energy 56. Renewable sources—of which hydropower is the most important—represent more than 76% of Brazil’s electricity generation mix. Taking into account electricity imports, which also come mainly from renewable sources, nearly 85% of the electricity supply in Brazil comes from renewable sources. 57. With the addition of approximately two GW of capacity in 2009, Brazil’s electric power generation capacity reached 106 GW by the end of that year. 58. In 2009, renewable energy represented 47.3% of Brazil’s domestic energy supply (including electricity generation and transport) while the global average was around 12%. 59. In addition to hydroelectric power and sugarcane ethanol, Brazil is increasingly exploring other clean energy sources such as wind power and biodiesel, as well as constantly investing in new, cleaner technologies. 60. Even though the average Brazilian’s domestic consumption of electricity is less than 30% of that of the average person in the UK, and even taking into account the significant energy efficiency gains Brazil will be making as a result of technological advances, demand for electric power in Brazil is predicted to grow by more than 4% per year over the next two decades. 61. This is largely because GDP growth will probably average around 5% per year and the country’s population, although growing at a declining rate, will probably expand to around 240 million. 62. As a result, it has been estimated that by 2030 Brazil will need to increase its capacity for power generation by at least another 100 GW. According to the Brazilian Ministry of Mines and Energy, around 3/4 of that extra power should come from hydroelectric plants, thus increasing the already very high proportion of energy from renewable sources in our overall energy mix and helping Brazil achieve its stated goal of reducing total carbon emissions by between 36% and 39% by 2020. 63. Over the coming years, the increase in the demand for energy will result not only from the country’s economic growth, but also from the reduction in social and regional disparities. It will thus be at the same time a vital tool and a welcome result of our success in fighting poverty and overcoming underdevelopment.
Belo Monte Dam 64. The Belo Monte dam needs to be seen in the context of Brazil’s projected energy needs. Belo Monte is expected to provide around 13% of the extra hydroelectric capacity Brazil will gain over the next twenty years, and to meet the electricity needs of around 18 million homes (60 million people). The dam’s efficiency in terms of MW per flooded square kilometre (around 20 MW/ km2) will be higher not only than that of Brazil’s other big dams but also far higher than that of Europe’s largest hydroelectric power plant, Alqueva in Portugal (a mere 0.95 MW/ km2). 65. As an indication of how seriously the Brazilian government takes the issue of environmental impact, an estimated 16% of the entire cost of the dam will be spent on mitigation measures. These measures, stipulated in the environmental license for the dam that was granted by the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), include both conventional initiatives, such as the management of the threatened fauna and the creation and maintenance of ecological reserves in the region, and less conventional ones such as the decision to transport the thousands of construction workers to the site for their shifts and then take them back to their homes immediately afterwards, so as to limit the creation of new settlements in the region around the dam. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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66. As for the impact on the indigenous population in the region, none of the ten indigenous territories in the region will be flooded and there will be no need to relocate any indigenous community living on land recognised by the Brazilian state as their traditional home. Also, one of the conditions for the granting of the licence for the dam’s construction was that the rate of flow of the Xingu river—important in many ways for the local indigenous population—would not be adversely affected. 19 April 2011
Written evidence from the Serious Organised Crime Agency (SOCA) 1. Brazil is an important law enforcement partner for SOCA, particularly in relation to combating drug trafficking. Colombian trafficking groups continue to dominate the worldwide trade in cocaine, but pressures placed on these groups in Colombia have resulted in the relocation of some trafficking operations to other South American countries. Work with Brazil, targeting the cocaine trade, is an important part of SOCA’s overall end to end approach to target drug trafficking impacting on the UK through dislocating and disrupting the trade at source. 2. SOCA’s upstream work against cocaine has contributed to a positive impact on the availability, price and purity of the drug in the UK. Wholesale prices for cocaine are now at an all time high, with a kilogram reaching prices of over £50,000. The average purity at dealer level has also fallen sharply from 62% in 1999 to approximately 20% currently. 3. Unlike neighbouring Colombia, Bolivia and Peru, Brazil is not a significant drug producer. However, shared borders with key cocaine-producing countries and forty large container ports have contributed to Brazil becoming a major transit route for cocaine exported from South America to Europe. In addition Brazil has well-developed communications, infrastructure and banking services, together with major international airports. 4. There are limited indications that the UK is a direct customer for cocaine trafficked through Brazil. Brazil’s exports to key nexus points in Europe and West Africa are likely also to constitute an indirect contribution to UK supply. Direct trafficking of cocaine to the UK will usually be “little-and-often” by couriers on direct flights from Brazil to the UK. 5. SOCA works closely with the Brazilian Federal Police operationally on organised crime, including drug trafficking. Regular capacity-building exercises focusing on container profiling and port searches are conducted with the Federal Police and Brazilian Customs. This is producing results. In June 2010 a Brazilian customs team in Santos identified a suspect container that was subsequently discovered to contain 1.7 tonnes of cocaine concealed in apples. SOCA has also facilitated ship rummage courses to joint teams of Federal Police and Customs officers, provided by trainers from the UK. This training is used regularly in the respective ports. 6. Balkan criminals based in Brazil are organising bulk shipments of cocaine to Europe, including the UK. Operational activity involving SOCA has resulted in seizures, arrests and assets denied (over two tonnes seized in the FY 2010Ð11). Further SOCA operational work regarding this transit route continues alongside Brazilian and Balkan law enforcement. 7. There will be benefits for the UK if Brazil takes a lead in the region on counter narcotic efforts and there are encouraging recent signs that they are starting to do so, particularly in Bolivia where bilateral assistance is planned. 8. Brazil has a large and increasing domestic cocaine market (second in size only to the USA) which is likely to be a particular focus for the Federal Police going forward. SOCA is encouraging Brazilian partners to continue to focus on tackling cocaine trafficking via its eastern seaboard and airports, given the beneficial impact such activity has on the UK. 21 April 2011
Supplementary written evidence from the Serious Organised Crime Agency (SOCA) UK-Brazil Relations inquiry On 27 April 2011, I gave evidence to the Foreign Affairs Committee on behalf of the Serious Organised Crime Agency (SOCA) in respect of the above inquiry. During the session the Committee asked how many SOCA employees were based in Latin America and I undertook to write to you to provide that figure. I can confirm that the total number of SOCA employees posted to that region is sixteen. Mark Bishop Head of Strategy, Co-ordination and Development International Department 11 May 2011 cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence from WWF
There are three points WWF would like to address in this inquiry:
1. The opportunities and experience of the UK and Brazil working as partners in international negotiations, with a particular focus on the climate negotiations. Other negotiations include those on the Convention on Biological Diversity and the forthcoming Rio 2012 United Nations Conference on Sustainable Development.
Brazil is a key player internationally and is showing a progressive approach—both domestically and internationally. Brazil scored highest in the recent Climate Change Performance Index 2011 published by Germanwatch and CAN (Climate Action Network) Europe. Brazil is active and often leads in the G77. The UK has also taken a prominent role on climate change both within the EU and individually. The UK has already shown by example, with the Climate Change Act, that nation states can set standards. The UK is also active diplomatically and is supporting low carbon development plans in a number of countries, including work in Brazil. Brazil however considers that the EU as a whole has lost its leadership with no progress as yet on the 20% emissions reduction target for 2020, although there is recognition that the UK is one of the member states pushing for a more ambitious target.
2. Experience to date and future opportunities for the UK to assist Brazil through helping to fund initiatives of global significance, such as Caroline Spelman’s recent announcement on funding for biodiversity dialogues in Brazil, and potential support for climate mitigation initiatives including REDD+;
Despite Brazil’s status as an emerging economy, there is still a need—and opportunity—for the UK to support Brazil on environment issues. For example, while Brazil has come forward with voluntary actions for reducing emissions, UK funds would be welcome to support and strengthen these efforts, on REDD+ and wider mitigation plans. WWF UK and WWF Brazil are working to support the development and implementation of Brazil’s low carbon development plans at the national level and at the state level—for example, in the state of Acre on one such example relating to REDD+ and a forest-based economy which is funded partly from DFID and partly from the private sector.
3. The impact of trade with the UK and Europe on Brazil’s environment, with particular examples of the trade of soy which is damaging the important Cerrado region of Brazil, and of the import and use of bioethanol.
In Brazil the Cerrado is an internationally important habitat which along with the Amazon and its rainforest is crucial in maintaining natural services on which we all depend. Therefore responsible sourcing of commodities from these important habitats, such as soy, timber and bioethanol, is important for both producer and consumer. This requires action both by the private sector and the governments involved. For instance the UK Government, through DFID and DEFRA, along with private sector companies and organisations such as WWF are working to support the Roundtable on Responsible Soy and a new Roundtable on Responsible Biofuels. 26 April 2011
Written evidence from Michael Evans
Executive Summary
1. Green-Tide Turbines Ltd are developing unique Patented technology for a water turbine designed to extract energy from run-of-river and tidal stream. The UK funding environment has been challenging and has recently been made worse by the recent cuts to the Carbon Trust’s budget resulting in the withdrawal of the potential of a £400 thousand grant to support our next development phase with QinetiQ. Brazil is a major market for us for both run-of-river and tidal stream, through UKTI we have met with a number of Brazilian energy utility companies and secured offers of free R&D in Brazil and future investment.
2. Michael Evans, Green-Tide’s founder and chief executive would like to propose a scheme whereby UK Government extend their current insurance policy covering UK foreign liabilities and assets to cover IP protection for UK SMEs.
Introduction
3. Michael Evans is a serial entrepreneur and inventor, Michael was co-inventor of the Compact Mixed Reactant fuel cell and co-founder of CMR Fuel Cells plc. CMR started up with assistance from Carbon Trust and secured two rounds of VC funding before floatation on AIM at a valuation of £50 million in December 2005.
4. Under the founder’s management, CMR were elected “Innovators of the year 2005” by the Carbon Trust and Daily Telegraph, “One of the top 25 companies to change the World by 2010” by RedHerring and Harvard Business School and “Technology Pioneers 2006” by the World Economic Forum. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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5. Michael left CMR in March 2008 and started developing his water turbine concept, forming Green-Tide Turbines Ltd in March 2009. Michael has a Master of Arts in Industrial Design and a BSc(hons) in Production Engineering and 20 years project management experience.
6. Green-Tide Turbines Ltd are exploiting opportunities in Brazil for their technology and are in discussions with the UK Intellectual Property Office about adaptation of the Lambert Collaboration Toolbox, developed for collaboration between UK businesses and academia, to work for collaborations of a similar nature between the UK and Brazil.
Information
7. Lack of funding in Europe has resulted in Green-Tide Turbines Ltd’s strategy shifting to Brazil and we are considering how a UK company can take advantage of opportunities in Brazil whilst remaining essentially a UK based company contributing to the UK economy. This motivation is aligned with UK Government strategy of developing a knowledge based economy and highlights the importance of Intellectual Property protection in Brazil in exploiting these opportunities.
8. We are a small, resource limited SME funded by Angel investors, we have no revenues as we are currently purely focused on research and development. The only thing we have of value is our Intellectual Property and this is used to secure the funding we need to conduct R&D through sale of equity in our business to Business Angels and/or Venture Capitalists. Our investors are therefore extremely sensitive to risks to our IP. Going into Brazil represents a significant risk to our IP especially as we will be working with Brazilian Universities and large Brazilian companies with large legal teams in a highly complex foreign legal system.
Recommendations for Action
9. IP risk is a very large barrier to many SMEs exploiting foreign markets, not just Brazil; reducing this risk will lower the barrier and encourage SMEs to export their technology in new foreign markets and improve the UK’s balance of trade. My suggestion is for the UK Government to extend their current insurance policy covering our foreign liabilities and assets to cover IP protection for UK SMEs. We can therefore trade with the confidence that we have UK Government resources behind us. Also, any company considering infringing our IP will think twice when they realise we have significant legal resource to back us up.
10. Advantages: — Reduction of risk to IP gives our investors confidence to provide financial backing to our strategies in foreign markets. — Our negotiating position and therefore confidence in dealings with foreign partners is strengthened ensuring UK companies get a better deal and bring more profits back to the UK economy. — Potentially it would provide a very good return on investment for the UK taxpayer. — This scheme would show a strong Government to Government commitment to bi-lateral trade. — This would encourage increased legal argument between UK and Brazil and help establish legal presidents and treatise further tightening UK and Brazilian commercial ties. — Backing of this sort would give UK businesses strategic advantages over other countries competing for business in Brazil. 1 April 2011
Written evidence from Dent Associates Ltd
Summary — Climate change and science are considered sufficiently important to justify special networks in FCO posts, however, food security is of equal political significance yet in countries such as Brazil (a leading nation in agricultural production in a few years time), there are no such appointments. — The UK has an agricultural research base consisting of 280 research organisations and university departments developing techniques and technologies relevant to agriculture in Brazil and especially in relation to the impacts of climate change and yet no priority is afforded food security—an area in which the UK has significant global potential. — A recommendation is given for a more strategic focus on national benefits to be derived from technology transfer and pro-active support for those UK companies and HEIs with relevant technologies that can be transferred and lead to UK-Brazilian business joint ventures. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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— Greater financial support and priority should be provided through UKTI for agricultural and food science and related technology transfer between the UK and Brazil. — A recommendation for the establishment of a Brazil Britain Business Council in the same way as a China Britain Business Council (CBBC) and an India Britain Business Council (IBBC) is given. — The FCO should create a global network of posts addressing food security, certainly as a priority in the BRIC nations all of which have agriculture as a key component of national growth—primary among which should be Brazil. The focus should be on co-ordinating international effort and in supporting the development of joint ventures with UK science based agriculture and food companies or licensing agreements.
Biography: Dr David Dent & Dent Associates Ltd
Dent Associates Ltd provides advice and support to science based organisations and industry involved in food security, quality and safety and the impacts of climate change in relation to export and international partnering, government affairs and regulation, technology transfer and innovation.
As former Managing Director of the intergovernmental, UN Treaty Level Organisations CABI Biosciences, David Dent, Chief Executive of Dent Associates Ltd, has experience working with Ministers of State, Ambassadors and senior government officials in over 30 countries as well as participation at intergovernmental conferences and programme development with UN and National Development Agencies including the World Bank, Inter-American Development Bank, DfID and USAID.
Over the last seven years David has been building high level business relationships between Brazil and the UK including technology transfer, facilitating establishment of joint ventures and participating in visits by UK Government Ministers (most recently the Secretary of State for Business Innovation and Skills, the Rt Hon. Vince Cable MP) and Government Chief Scientific Advisers. Of particular note was his proposal and facilitation during the visit by Sir David King in 2007 that led to the establishment of the Brazilian EMBRAPA LABEX Programme in the UK. David is a frequent visitor to Brazil, as a representative of UKTI but also for his own company Dent Associates Ltd, which employs a Brazil specialist who has an office in Brasília. Significant expansion of Dent Associates Ltd activities in Brazil is planned for over the next five years.
Trained as an agricultural scientist David has invented, patented and commercialised innovative technologies in support of sustainable agriculture, bridging the divide between academia and business with the successful creation and secured investment for two science-based companies, Conidia Bioscience and I2L, as well as a new publishing company ADG Publishing Ltd. David is a Vice President of the Parliamentary and Scientific Committee, a publicly elected Governor of the Surrey and Borders National Health Service Foundation Trust and Founder of the Pennies Foundation and inventor of the scheme which generates funds for charities through the rounding-up of card payment transactions at retail point of sale.
UK-Brazil Relations
1. Agriculture and food science base
1.1 The UK has 280 separate institutions, university departments and commercial companies engaged in agricultural research with unique specialist capability in cereals (including biotechnology), horticultural crops, soil science and nutrient use, non-food crops and their exploitation (including biofuels), grassland and animal feed, veterinary health and welfare, animal breeding and food safety, forestry and rural land management (The UK Agri-Food Science Directory 2008–09—IATC/UKCDS p 119—compiled by Dent Associates).
1.2 The agricultural science base in the UK is involved in the development of a number of technologies and innovations in the field of food security and waste management; Dent Associates Ltd are currently compiling a report (for publication in the summer 2011) which identifies 100 leading UK innovations in food security, water use and waste management. Although, water use is not a major issue in Brazil, many of the technologies and innovations are applicable to Brazilian agriculture and food processing industries. In order to maximise the value of these technologies to UK plc and to enable their application to one of the world’s leading agricultural producers, a more co-ordinated strategic approach is needed and resources prioritised for technology transfer and the establishment of joint ventures with international relevance and impact.
1.3 While the promotion of science collaboration between UK and Brazil in agriculture through the FCO Science and Innovation Network, the EMBRAPA LABEX Programme and the FAPESP/BBSRC collaborative funding agreement, too little resources are allocated for the specific promotion of UK-Brazil technology transfer within agriculture, food processing and waste management.
1.4 Given the priority afforded agriculture in Brazil to their economy, the reputation and extensive capability of the UK agriscience and food science base, the technologies that are available in the UK which are relevant to Brazil, too little resources and priority is given to promoting UK-Brazil collaboration in this area. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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2. UK Government Priorities 2.1 Export in support of growth in the UK economy is a government priority. Food security is a government priority as is climate change, which interacts with agriculture in both mitigation and options for adaptation. Climate change impacts in relation to agriculture need to be addressed by new technology and innovative farming practises—all of these Government priorities are addressed in the export of UK agriscience and food technologies to Brazil.
3. Food Security 3.1 Tackling food security is essential to our security and prosperity as a nation. Food security is a global problem and therefore requires a global solution. The FCO should be working with a global network of posts in the same way as it does with climate change to promote international action on food security. The issues are related, and will impact massively on the ability of our nation to sustain its food supplies, not least through building relationships with countries such as Brazil. 3.2 As Prof Sir John Beddington, the Government Chief Scientific Adviser, stated at the Westminster Food & Nutrition Forum Keynote Seminar, Thursday 31 March 2011 “There has been a disgraceful lack of investment in agriculture in the last 30Ð40 years” and this is certainly true with regard to that allocated to UKTI in this field in the last 5Ð6 years, relative to others. Food security has to move up the political agenda and not least be afforded the same priority and resources of those given to climate change. 3.3 Chicken, pork, beef, orange juice, soybeans, coffee, corn, bananas, and chocolate [cacao & sugar]; by 2020 Brazil could easily be the world’s leading exporter in each of those fourteen items, according to the OECD-FAO’s forecast of 40% overall growth in Brazilian agriculture. That astounding capability surmounts all other nations. Brazil is presently using only 12% of its potential arable soil, and it still has more virgin territory than anywhere else on earth. The US Department of Agriculture estimates that there remains an additional 420 million acres that could be developed for farming. That’s an area bigger than the sum of France + Belgium + Nigeria, or Alaska + Indiana. 3.4. The nation that the UK needs to be building relationships with regard to food security is Brazil and we have some of the most exciting and innovative agricultural technologies and companies who with the right support could help galvanise agricultural production which if partnered in the right way could generate significant economic returns to UK plc.
4. Recommendations for Action 4.1 A more strategic focus on national benefits to be derived from technology transfer and pro-active support for those UK companies and HEIs with relevant technologies that can be transferred and lead to UK-Brazilian business joint ventures. 4.2 Greater financial support and priority should be provided through UKTI for agricultural and food science and related technology transfer between the UK and Brazil. 4.3 The establishment of a Brazil Britain Business Council in the same way as a China Britain Business Council (CBBC) and an India Britain Business Council (IBBC). 4.4 The FCO should create a global network of posts addressing food security, certainly as a priority in the BRIC nations all of which have agriculture as a key component of national growth—primary among which should be Brazil. The focus should be on co-ordinating international effort and in supporting the development of joint ventures with UK science based agriculture and food companies or licensing agreements. 17 April 2011
Written evidence from Professor Dr Gisele Araujo, Nabas Legal International Lawyers Short Summary — Sustainability and efficiency in the energy context—Energy Security. — Oil and Gas Scenario. — Policy and production. — Risks, Logistics, Technical and Environmental Challenges.
Brief Introduction Professor Dr Gisele Araujo Professor, scientific researcher and legal consultant for Nabas Legal International Lawyers in comparative international environmental Law, has been actively engaged with the negotiations leading up to COP15 and COP16 and in the legal assessment of climate change, oil and gas/bioenergy expansion in Brazil as well as the current discussions about agro-ecologic zoning for biofuel production in Brazil. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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1. Sustainability and efficiency in the energy context—Energy Security 1. The Brundtland report defines sustainable development as a development that “meets the needs of the present without compromising the ability of future generations to meet their own needs”. Energy plays a crucial role in sustainable development because without energy there is no development, energy enables development. Energy lifts people out of poverty. Its availability influences practically all fields of social, economic, and political activities; the environment and climate are influenced by it, and often it determines whether nations live in peace or conflict. Accordingly, “the use of energy is only sustainable when the sufficient and permanent availability of suitable energy resources is assured, while at the same time, the detrimental effects of supplying, transporting, and using energy is limited.” 2. Since the beginning of industrialisation, energy consumption has increased considerably more rapidly than the planet’s population. Whereas the world population has quadrupled since 1870, to six billion at present, the world-wide energy consumption and therefore the consumption of fossil resources in the form of coal, oil and natural gas, has increased 60-fold. The average person today consumes 15 times more energy than a person 130 years ago; those living in industrialised countries consume even more. The current explosion in energy consumption started about 1950; and doubled between 1970 and 2000. Moreover, no fundamental change of this growth trend is expected in the foreseeable future. 3. The traditional use of biomass in many of the less-developed countries, in the form of the non-commercial use of firewood constitutes 9% of the world-wide consumption of primary energy. Other types of renewable energy, primarily hydropower, add up to a share of 4.5%. Nuclear power meets 6.7% of the demand. Thus some 80% of the world’s energy supply is based on finite fossil energy carriers: in commercial applications the figure is as high as 88%. The data demonstrate that energy supply world-wide is based primarily on the finite fossil energy carriers of coal, mineral oil, and natural gas. Assuming a constant rate of consumption, natural gas will last approximately another 50 years, coal another 100 years, and mineral oil another 60 years. 4. For our supply to become sustainable, it needs to satisfy a large number of requirements: climate compatibility, sparing use of resources, low risks, social equity and public access. It should also give a fresh boost to innovation and help create jobs with a future. Numerous worldwide and regional studies indicate that renewable energy sources are capable of meeting these requirements. 5. The energy required to satisfy human needs must be available on demand and in sufficient quantities, in terms of both time and location. Equal opportunities in accessing energy resources and energy services must be assured for all. The energy supply must be adequately diversified so as to be able to react to crises and to have sufficient margins for the future and room to expand as required. Efficient and flexible supply systems harmonising efficiently with existing population structures must be created and maintained for the generations to follow. The adaptability for the regeneration of natural systems (resilience) may not be exceeded by energy- related emissions and waste. Risks for human health concerning the generation and use of energy should be minimised and limited in space and time. Developing energy systems with international co-operation should reduce or eliminate potential conflicts between states due to a shortage of resources and also promote the peaceful co-existence of states by the joint use of capabilities and potentials. 6. A high share of renewables alone does not ensure that all sustainability criteria will be fulfilled, but rather requires in parallel a significant increase in energy productivity and a real change in production and consumption patterns. Doubling energy consumption by the year 2050 would result in enormous pressure on non-renewable energy resources despite the high proportion of renewable energy. Climate change targets cannot be met either unless the production and consumption patterns are re-dimensioned or reduced. 7. Brazil is emerging as a leader in both renewable energy and oil and gas areas, as internal developments are making it a stronger player internationally. 8. Brazil turned to biofuel technology in response to the 1970s oil crisis and out of a desire to reduce dependence on Middle Eastern oil. Despite the ups and downs in the development of this process, it seems to be successful, as more than 80% of new cars now being sold in Brazil, called “FLEX Cars” are manufactured to run off either ethanol, gasoline, or a combination of the two. 9. Energy security in Brazil will play a significant role internationally as current crises force other countries to seek alternative energy sources. Brazil’s example in the ethanol market is an illustration of how the country developed alternative fuel sources, mainly at a time when Brazilian nuclear strategy gained more attention, especially as the nuclear issue causes special concerns with countries such as North Korea, Iran, and Pakistan. Consequently, many countries begin to look to South America as a source for new energy. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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2. Oil and Gas Scenario
DF GO
MG ES
SP RJ
PR
SC
10. The Brazilian government of President Getúlio Vargas created Petrobras in 1953 to undertake a path toward oil self-sufficiency. Petrobras worked to guarantee retail supplies of transportation fuels and lubricants to all regions of Brazil during the first two decades of operations.
11. Petrobras first focused on building refinery capacity for oil imported from the Middle East. The oil crisis of the 1970s influenced most Brazilian policymakers to consider that their country’s dependence on oil imports jeopardized national development and security. For this reason, Petrobras doubled up on efforts to search for hydrocarbon reserves in Brazil while the military government established the National Alcohol Programme (PROALCOOL) to subsidize the production of ethanol fuel from sugarcane to give support to the transport sector supplies.
12. Although the company began searching for offshore reserves as early as 1968 near the coast of Sergipe, it was not until 1974 that it found the Campos reserves off the coast of Rio de Janeiro, the largest discovered until the pre-salt reserves.
13. Petrobras’ discoveries in the Campos basin meant Brazil could implement energetic policies and programs developed to set a more consistent public-private base for petrochemical and ethanol production to tackle the nation’s dependence on oil and oil derivative imports.
14. In 1975 the government took advantage of declining world sugar prices to launch the PROALCOOL programme to provide tax incentives, credits, and infrastructure to sugarcane and ethanol producers. Between 1975 and 1985 domestic ethanol production quadrupled. Such concerted efforts to find hydrocarbons, produce ethanol, and displace imports in the 1970s were not merely the case of adjusting the national economy to the international prices; it was also an effort to turn the development and security strategy sustainable within an increasingly instable international environment where energy was essential.
15. So crucial was the country’s strategy of development and industrialization considered for national security that it justified a thorough political, financial, institutional, and technological mobilization.3
16. If the oil crisis of the 1970s reinforced Brazil’s defensive imperative to decrease energy imports, then it was the partial privatization of Petrobras in 1997 that replaced the state controlled import substitution strategy with a more balanced, entrepreneurial approach that stimulated private and foreign investment, technology transfer, and production efficiencies.
17. The campaign to liberalize Brazilian production, through the partial privatization of Petrobras and the concurrent formation of a concessionary policy framework for hydrocarbon exploration and production created the favourable conditions which led to the pre-salt discoveries less than a decade later. 3 See Sennes, Ricardo Ubiraci and Thais Narciso. “Brazil as an International Energy Player,” in Brazil as an Economic Superpower? Understanding Brazil’s Changing Role in the Global Economy. Edited by Lael Brainard and Leonardo Martinez- Diaz. Brookings Institution Press. 2009:17Ð54. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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18. Under the 1997 Oil regulation, Brazil’s proven reserves of oil and gas grew by 40%, investment rose from $4 to $25 billion per year, production doubled in the following decade, and the petroleum sector’s importance to overall Gross Domestic Product (GDP) expanded from 2% to 10%. Two decades ago Brazil purchased over 40% of its energy from abroad; in 1999 that had reduced to 24.1% of its total energy consumption, including 34.5% of its petroleum use. 19. By 2008 the nation had reduced its external energy dependence to 8.3%, achieved self-sufficiency in crude oil production, and was the world’s largest exporter of ethanol. Between 2005 and 2009, oil production rose from just over two million barrels per day to nearly 2.6 million, and ethanol production grew from nearly 4.2 million gallons to over seven million gallons. With transportation fuel security at hand, the Brazilian government challenge is to develop a policy framework that can provide energy efficiency by doubling the production of oil and gas at the same time that keeps the country in an advantageous position in the global political economy. 20. Brazil found its path in energy security by discovering the “pre-salt” oil reserves in 2006. The expression 'pre-salt' refers to an aggregation of rocks offshore in a large portion of the Brazilian coast and with potential to generate and stock oil. For decades, Brazilian governments have taken great efforts to find hydrocarbons, lower oil imports, and develop a national market for sugarcane based ethanol as a transportation fuel replacing the use of imported oil. 21. By the end of President Lula da Silva’s first term (2003Ð06) it was evident Brazil had significantly achieved transportation fuel security by boosting oil and ethanol production as a base for a new flex-fuel passenger vehicle agenda. 22. Petrobras found its new oil and gas reserves in cooperation with a consortium of oil and gas companies to prospect deep-water oil in the Tupi fields of the Santos basin near the State of São Paulo. 23. The Brazilian National Petroleum Agency (ANP) released its oil & gas production report for January 2011. Brazil’s oil production reached 2.122 million barrels per day (bpd), rising 6.3% in comparison to January 2010. However, oil production dropped around 2.65% over December 2010, but was higher than November’s oil production of 2.089 million bpd. Gas production reached 66 million cubic meters per day, 13.2% higher than January 2010, and 4.3% lower than December 2010. 24. Brazil’s oil and gas production reached 2.539 million barrels of oil equivalent per day. There was a significant reduction in oil production in January 2011 in the Caratinga, Polvo and Urugua oil fields in comparison to December 2010 because oil production was put on hold at Platforms P-48, FPSO Polvo and FPSO Cidade de Santos.
3. Policy and production 25. In 2009 President Lula introduced four integrated legislative provisions to maximise state control over the pre-salt reserves. The proposed regime includes four key pillars: 1. designing an oil production sharing regime; 2. strengthening Petrobras’ role and tasks in the process of exploration; 3. creating a new state controlled company, Pré-Sal Petróleo, S.A or “Petrosal”, to manage the Production Sharing Agreements (PSAs) and commercialize the state’s portion of the profit oil earned from each PSA; and 4. setting up a new Social Fund to manage the income generated by Petrosal’s stake in the PSAs. 26. This new production framework was designed to replace the concessionary model in place since 1997 for those blocs denominated “strategic” by the National Agency of Petroleum, Natural Gas, and Biofuels (known as the ANP). The proposed production sharing regime falls short of completely renationalising oil and gas exploration and production, but the roles of both Petrobras’ and Petrosal should provide the Brazilian state with strong control over the nation’s hydrocarbon resources. 27. Under the proposed policy framework, the National Council for Energy Policy (CNPE) would continue to design national energy policy, but the ANP would be authorized to identify strategic blocs from the pre-salt reservoirs and award them directly to Petrobras or to consortia with at least a 30% stake reserved for Petrobras. 28. The Brazilian state, represented by Petrosal, would also participate in all strategic bloc awards without making any investment. Therefore, the government will exercise control over exploration and production of the pre-salt reserves through its majority 51% ownership of voting shares in Petrobras and sole ownership of Petrosal. 29. The government’s regulatory adjustments to place Petrobras at the centre-stage of national efforts to exploit the pre-salt reserves comes after the company’s widely recognised success in developing competitive advantages in deep water exploration and drilling. 30. Lula administration’s proposals would mandate Petrobras as the sole operator with a minimum 30% stake in all strategic blocs. Under the new regime, ANP will manage public auctions of the strategic reserves to consortia with at least 30% Petrobras participation or opt to directly award an exclusive PSA to the state cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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controlled firm. Thus, the ANP determines under which conditions participating private sector or foreign state owned enterprises (SOEs) will be allowed to invest and apply their technological and managerial capacities in partnership with Petrobras. 31. On 30 June 2010 President Lula signed one of the key pre-salt proposals into law which allows for the transfer of rights to five billion from the pre-salt fields to Petrobras in return for the recently negotiated $42.5 billion worth of company shares. 32. This completed deal now sets up Petrobras’ impending public stock issue which could raise some $75 billion depending on how investors gauge the company’s falling stock price and the politics surrounding the pre-salt production. 33. Politics have certainly challenged Petrobras and slowed complete passage of the new regulatory framework as the producing states of Espirito Santo, Rio de Janeiro, and São Paulo duel with the non-producing states over the distribution of rents and royalties. 34. Law 5940/09 was sanctioned by the president with veto to article 64, which altered the distribution of royalties from the pre-salt. The measure, passed by Congress earlier this month, withdrew from the municipalities and states that produce part of the compensation received by oil extraction. The president will send a new bill to Congress by reinstating the model of distribution of royalties from oil, keeping the agreement reached earlier with the governors and mayors. 35. The victory of President Lula’s successor, Dilma Rousseff of the Workers Party, in October’s presidential election encouraged full congressional passage of the PSA regime and a rebound of Petrobras’ share price in early 2011. These probable outcomes will provide Brazil with state control over the nation’s hydrocarbon resources and one of the largest oil and gas companies of the world, providing future governments the revenues and tools for accelerating national development and projecting geopolitical power for decades to come.
36. The country’s hydrocarbon inheritance permits Brazil to make the most relevant contribution to regional energy security in South America and to become a stable supplier of crude oil and transportation fuels around the world, including the United States. Currently, Brazil is the second largest oil producer in South America, but it is expected to surpass Venezuela in the coming years as increasing numbers of pre-salt blocs come onto production.
4. Risks, Logistics, Technical and Environmental Challenges
37. Oil experts say investors will invest more in Brazil’s pre-salt due to conflicts in North Africa and in the Middle East, home to the world’s largest oil reserves. On one hand, high oil prices, which are almost hitting US$120 per barrel, tend to make pre-salt projects more profitable. On the other hand, the Brazilian political stability is considered an advantage in an unstable international market.
38. Pre-salt extraction costs are currently one of the biggest challenges since technology to extract oil from up to 7 km below sea level is very expensive. Petrobras has confirmed that pre-salt extraction costs are around US$25 per barrel, but other oil companies said costs are roughly US$ 45 per barrel. Brazil’s pre-salt findings add up to 36 billion barrels of oil equivalent (boe) (including oil and gas), according to Petrobras and the Brazilian National Petroleum Agency (ANP). Brazil will climb to 9th place in the world’s oil reserves ranking with an estimated 51 billion barrels (including existing reserves).
39. The main challenge of pre-salt shows that investment scenario billionaires and huge risks arising from pressure and temperature conditions never before experienced, corrosion of equipment, can pose a true technological and scientific challenge and a high hazard to workers or even tragedies like the leak in the Gulf of Mexico. Finding oil in entirely new conditions, overcoming the thick layer of salt, requires the development of new technologies for extraction.
40. As to the logistics, Petrobras signed a shareholders’ agreement to create a company called Logum Logística S.A., which will set up an extensive multimodal logistics system for the transportation and storage of ethanol. Logum Logística S.A. is a close corporation comprised of ordinary, registered and no-par-value shares spread as follows: Petrobras 20%, Copersucar S.A. 20%, Cosan S.A. Indústria e Comércio 20%, Odebrecht Transport Participações S.A. 20%, Camargo Correa Óleo e Gás S.A. 10%; Uniduto Logística S.A. 10%. The company’s capital will be initially set at R$ 100 million (US$ 60.9 mi).
41. Logum Logística S.A. will be responsible for the construction, development and management of a system (logistics, loading, unloading, storage, operating ports and water terminals) that covers pipelines, waterways, highways and cabotage. An estimated R$6 billion will be invested in a 1,300km Multimodal Ethanol Logistics System, going across 45 cities, linking the main ethanol-producing regions in the states of São Paulo, Minas Gerais, Goiás and Mato Grosso to the Paulínia Refinery (Replan) in São Paulo. The project will have a transport capacity of up to 21 million cubic meters of ethanol per year. 18 April 2011 cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence from TheCityUK Summary — TheCityUK believes prospects for increased trade with Brazil are significant. — UK well regarded in the financial and professional services sector but we have fewer links than other competitors such as the USA. — Brazil offers challenges and opportunities. — Potential to support 3rd country trade and help with international investment. — Many sectors where UK companies can succeed, all of which need the support of the professional services sector. — HMG needs to have regular high level Ministerial contact and avoid further postponements of senior visits. — HMG support also needed on obstacles to trade.
TheCityUK 1. TheCityUK is a membership body representing UK financial and related professional services. Its Board and Advisory Council include the most senior individuals from across the sector. It has a global export focus with a commitment to help UK based firms grow their business in other parts of the world. It has inherited the role of International Financial Services London (IFSL) and its predecessors, but has expanded its remit to represent the whole of the sector in its dealings with Government and internationally. Amongst its constituents, TheCityUK has established a Brazil Group which meets on a regular basis to exchange views and share best practice on how best to strengthen business relationships in this sector between Brazil and the UK. 2. TheCityUK welcomes the Select Committee’s decision to inquire into UK/Brazil relations and wishes to submit views which relate especially to the first bullet point on the inquiry’s list, namely UK/Brazil trade. TheCityUK and its members agree that the UK economy stands the best chance of recovery from its current economic difficulties if UK business does more to develop trading links with emerging markets, amongst which Brazil offers enormous prospects for further growth.
Brazilian Links with the UK 3. Senior Brazilian political, industrial and financial figures are aware of the UK’s strengths in this sector, and the importance of London in particular as a financial centre. Brazilians have had a long association with New York, and the US Business Schools, but they are also well travelled and often have longstanding cultural links with Europe. They have not failed to notice the transformation of London since the 1980s, and most, if not all, Brazilian international business figures know of the facilities and markets available in the UK for financial, legal and related professional services etc. But with China as Brazil’s major trading partner and Brazilian business aware of the global interest in its resources, competition is fierce. UK links overall are still too weak. Delegations from Europe, North America, and increasingly Asia/Middle East lose no opportunity to remind Brazil that they are also keen to develop business with Brazil. UK business organisations, both with and without the support of HMG, should be seeking to build on this awareness of UK expertise and compete actively in the expanding Brazilian market. 4. Brazil has been a regular destination for visiting Lord Mayors over the years, but the intensity has picked up since 2006. There have been three visits, all accompanied by business delegations, in the last four years, with the next one scheduled for June 2011. These visits have been very effective in maintaining contacts and establishing awareness across the Brazilian political, financial and business community of the services the UK has to offer in the financial, legal and professional services area. Lord Mayors have called on Governors, Ministers, Bankers, Industry leaders and other high level figures to emphasise that the UK is keen to raise the level of bilateral trade and investment between Brazil and the UK, and that practitioners in that field have a lot to contribute in facilitating such an increase. Regular visits have enabled the full agenda of subsectors represented by TheCityUK to be included and practitioners have found the access afforded by such visits to be invaluable in building up business relationships with Brazil. Brazil is a sophisticated market, where building relationships is important but takes time. For this reason, practitioners realise that to do successful business with Brazil requires patience and investment, with support at a political level.
The Brazilian Market 5. Brazil is the largest market in Latin America. The Select Committee will have access to material with statistics outlining the economic success of Brazil, its growth, its status as Investment Grade since 2008, its growing middle class, and its ability to withstand the international crisis of 2008 largely thanks to the strengths of its domestic market. The Committee will also know of the depth of Brazil’s natural resources, not least in energy, minerals, agriculture and biodiversity, which mean that its economic future is very encouraging. TheCityUK and its practitioners see the size and scale of the Brazilian economy, including the growth in inward and outward investment, plus its significant needs on infrastructure, as offering significant opportunities for developing trade and investment growth between the UK and Brazil. cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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6. There are good links between TheCityUK (and its practitioners) and the UKTI teams in Brazil and London. There are regular visits, exchanges of views, and two-way contacts to see how best UKTI can support UK companies in this sector. The Brazil-based sector team visits regularly for training and meetings, which is important to keep up with developments and staff turnover. The Posts in Brazil understand the importance of the financial and related services sector as a facilitator of business across other sectors. We acknowledge the significant expansion in UKTI activities both in market and in the UK in recent years to advise UK companies of the opportunities in Brazil, as demonstrated by the increased number of companies visiting the country. 7. TheCityUK welcomes the regular Joint Economic and Trade Committee (JETCO) meetings which are an important annual umbrella meeting to maintain contact at Ministerial level. The subject of financial services has been on the agenda each year, and should remain there given recognition on both sides for the role the sector plays. Good work has been done in technical areas which are important for the development of bilateral trade and investment, such as intellectual property rights and accreditation standards. We also welcome the establishment of a CEO Forum, and hope that this grouping does actually begin work in 2011 and that it will galvanise the private sector in both countries to raise awareness of the opportunities for further bilateral trade and investment. Many practitioners while hoping that such meetings will generate business opportunities recognise that the very holding of the meetings produces an atmosphere and environment where bilateral business prospects and contacts can be extended.
UK Entry into the Brazilian Market 8. Several UK-based law firms are operating or considering operating in Brazil. There are currently restrictions whereby they are only allowed to practice international law, and are excluded from domestic legal services. This subject is currently under the spotlight in the Brazilian press and subject to investigation by the Brazilian Bar Association. TheCityUK would welcome further liberalisation of the Brazilian legal services market while recognising that this will take time given the strengths of the domestic lobby. However, HMG should continue to raise this barrier to trade during appropriate bilateral discussions. 9. Meanwhile, the insurance sector also offers prospects given the growth in the insurance market in Brazil. The previous monopoly on reinsurance was lifted in 2008, and has led to significant growth for UK-based reinsurers. New regulations introduced in December 2010 were subsequently amended and it is not clear whether further changes are in prospect, and how far the regulators in Brazil will permit foreign reinsurers to expand their business. TheCityUK welcomes the liberalisation of the Brazilian reinsurance market, and urges HMG to encourage the Brazilian authorities to continue on this path. 10. Brazil will host a series of major sporting events in the coming five years, most notably the FIFA World Cup in 2014, and the Olympic Games in Rio de Janeiro in 2016, plus a number of preparatory events in the other years. These events have highlighted the need for significant improvements in infrastructure where Brazil has suffered from underinvestment for many years. Authorities at the Federal, State and Municipal level have looked at the possibility of using PPP schemes for much needed infrastructure projects. Although the legal framework is in place, the actual number of projects has been small, and there remains significant political opposition in many areas to using PPPs. Despite this, several authorities have contacted UK institutions and practitioners to register interest in PPP, and UK expertise is highly respected. But it is a slow process to convert interest into actual projects. TheCityUK encourages the Government to continue to support this method as a means of developing infrastructure projects globally, including in Brazil.
Brazilian Interest in the UK Market 11. Brazil has an increasing number of companies expanding their operations and investing overseas. This trend offers significant opportunities for UK-based professional services practitioners to offer advice on access to markets, finance etc. The UK should be promoted as a centre for advice to companies undertaking the range of cross-border trade and investment. The number of Brazilian companies registering to list on the markets in London remains disappointingly low, despite many efforts to explain the attraction of those markets. But the large number of Brazilian businesses and the attraction of overseas listings by Brazilian companies which increasingly seek foreign capital should mean that opportunities for London listings will remain. Brazil’s increasing trade and investment with Asia, especially China, the Middle East, and with Africa, offers opportunities for UK companies with expertise in these markets to advise and generate business. The concentration of expertise in many sectors in the UK means that we are well placed as a springboard to help Brazilian firms internationalise. It is also relevant that the large number of Brazilian professionals in London provides a pool of talent to assist UK practitioners to offer such services to Brazilian companies and large Brazilian institutions such as BNDES, BMF Bovespa and Petrobras already have a presence here.
Opportunities for the UK in Brazil 12. Brazil’s economic growth is already revealing serious skills shortages in many sectors. This is a consequence of many decades of low educational standards and limited opportunities to introduce specialist training. The private and public sector have realised that this shortage will be a barrier to further economic development, and is aware that improvement is needed to enable Brazil to cope with the impact of such development. This awareness offers a range of opportunities for UK institutions. The UK is seen as a centre for training in many professional services and this is an opportunity for expansion. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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13. Economic developments in Brazil offer serious opportunities for further development of Private Equity in Brazil. Although it is increasing, capital committed to Private Equity is still relatively small. The regulatory environment in Brazil is continuously strengthening and has favourable laws on fund formation and operation with permissive regulations on institutional investors. The Brazilian Private Equity industry is acknowledged to be the most transparent and best regulated of the four BRIC nations. Several studies have shown that Private Equity investments in Brazil will rise significantly in the next few years.
14. TheCityUK believes that the UK offers exceptional products in financial, legal and professional services and is home to world-class practitioners in the field. We will continue to encourage HMG to support the sector as a major generator of business for UK PLC. But the sector not only generates business in its own sector. Bilateral trade flows can only take place when the professional services practitioners—lawyers, accountants, consultants, financiers etc provide the mechanism for trade and investment across all other sectors. The opportunities for UK companies cover a range of sectors: infrastructure, energy (including biofuels where Brazil is a world leader), minerals extraction, sporting events, food, biodiversity, creative industries, defence— all sectors which are already expanding rapidly, where finance, expertise and support can be obtained from the UK. Moreover, the increasing number of scientific collaborations between the UK and Brazil, where the UK is now seen as the scientific partner of choice for many Brazilian researchers, will mean that venture capital and other means of finance will be needed for UK/Brazilian start-ups. This area offers huge potential for professional services needed to formalise these relationships.
Role of the Government in Promoting UK Interests
15. TheCityUK understands that business with Brazil is helped by high-level engagement between political leaders, business figures and public personalities and that this will help the UK to regain lost ground in business with Brazil. We welcome the emphasis the Coalition Government has placed on Ministerial contacts with Brazil. We urge senior Ministers to visit the country regularly, to rectify the historic absence of high-level visits, and to carry out visits once they have been scheduled. We recognise the pressures of parliamentary business on busy Ministers, but would urge them to schedule visits at times which would make it unlikely to cancel. In this context we regret the postponement of two senior visits in the first four months of 2011 and urge HMG to remedy these postponements as soon as possible.
16. There are also barriers to market entry in Brazil which need to be tackled bilaterally and through the EU’s common commercial policy. For many years Brazil, despite being open to immigrants, adopted a policy of import substitution and was largely inward looking and often protectionist. There were significant barriers to market entry, and the low penetration of the English language led to difficulties for UK companies. Given this background, Brazil was and to some extent still is not well suited to companies new to international business. But modern Brazil is changing and has many similarities to Europe in ways of doing business. It should therefore become increasingly accessible for UK firms. Support from HMG is vital across many sectors not least because other governments are very active in promoting trade and investment with Brazil. The UK suffers in many quarters from a perceived neglect of Brazil in the 20th Century.
17. TheCityUK therefore welcomes the support HMG gives to promoting financial and legal services in Brazil and for treating Brazil as a priority. But we also believe more could be done and opportunities to raise awareness within the UK should be increased. TheCityUK also welcomes the revival of the negotiations between the EU and Mercosur (in which Brazil is the leading market) with a view to an EU-Mercosur Free Trade Agreement.
18. The absence of a Double Taxation Agreement (DTA) between Brazil and the UK has been mentioned by several companies and business organisations as a barrier to increased trade and investment between Brazil and the UK. This subject is highly technical, and not easy to resolve when both countries have such different approaches to DTAs. It has been discussed regularly at JETCO and elsewhere, although neither BIS nor their Brazilian opposite numbers lead on the subject. HMRC have a global policy of adopting the OECD model for their DTAs whereas the Brazilian taxation department (Receita Federal) do not use the OECD model. TheCityUK recognises the difficulties when the approach to DTAs is so different in each country, but urge HMG to continue to encourage a DTA as beneficial to both sides.
Recommendations
19. This paper acknowledges the potential for expansion in UK/Brazil trade and investment. The private sector will develop its own ways to increase its links with Brazil, but at the same time TheCityUK encourages HMG to give Brazil the due attention it deserves and to devote high level time to developing the relationship with senior figures in Brazil, including reinstating the high level visits which were postponed and to avoid any further postponements. TheCityUK also urges HMG to work further to encourage liberalisation in the services sector, especially in legal services and reinsurance. We also recommend HMG continues to explore the potential for agreeing a Double Taxation Agreement with Brazil. 18 April 2011 cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence from the British Council BRAZIL-UK CULTURAL RELATIONS Brazil-UK Focus The importance of Brazil to the UK Brazil matters to the UK because of its economic success, its growing foreign policy influence, as an economic super-power, and its development achievements. Brazil is the country outside the G8 with the best science base (eg biotechnology, genome, stem cell research). It holds the largest bio-diversity in the world, alongside with the largest fresh water supply. It has fundamental democratic freedoms in place and benefits from a secure neighbourhood and no significant international tensions. It is the most like-minded of the BRICs. Brazil is already courted by other countries seeking to share in its growth. Strengthening ties with Brazil will help to promote a range of UK interests. Brazil is the 8th largest economy. It accounts for 55% of South America’s GDP and is forecast to become the 4th largest economy by 2050. Brazil will host the 2014 World Cup and the 2016 Olympics and will invest GBP 17 billion in related projects.
The importance of Brazil-UK cultural relations There is high regard for UK expertise in science, development work, and public-sector management and reform. Brazil wants access to UK technology, science, universities and knowledge of how to run major sporting events. Brazil increasingly wants to exchange views on domestic policies. The current administration has an ambitious reform programme, including improving the quality of education (social equality, citizenship, and development), the transforming power of science and technology and valuing Brazilian culture and dialogue with other cultures. Research (over 2,000 young Brazilian aspirants between 16Ð34 years) shows that 92% view the future with optimism and at least 50% said their view on life has become more liberal over the past six years. 85% of interviewees believe in the power of networks as a tool in their career progression. They are interested in music, culture, sports and family but expressed concern about violence, unemployment and drugs. Young Brazilians make increasing use of communication tools. 84% use e-mails, 83% use social networks and 81% make regular use of SMS. Social and other networks are becoming more and more popular.
Where the British Council can make a difference The British Council makes a positive difference in communities in Brazil through an international relationship with the UK. We focus on English language, Higher education and research, Arts, and Sports. The 2014 World Cup will be staged in 12 cities across the country and this provides a clear geographical focus for the Council—these states account for 75% of the population. Working with partners in Government (Federal, State, Municipal) the Commercial sector and NGOs, we will achieve the following by 2015: — 70,000 English teachers and one million English learners across Brazil accessing high-quality British Council materials, building appreciation and understanding of UK excellence in language teaching. — New UK-Brazil Education MoU and Higher Education Partnership Programme leads to 50% increase in institutional, postgraduate and faculty exchanges. — As a result of UK Season in Brazil (2012Ð13) Brazilian public opinion sees UK as creative and innovative. New opportunities for co-operation in culture, education, innovation and policy reform identified as a result. — New UK-Brazil Cultural MoU leads to significant increase in partnerships between cultural institutions and a 25% increase in economic benefits from cultural exchanges. — Five million Brazilians reached across Brazil through UK World Cup and Olympics programmes building on International Inspiration using sport as a central theme of projects targeting youth organisations and divided communities.
British Council Work and Projects in Brazil The British Council was first established in Brazil in 1945 and currently has four offices located in Brasília, Rio de Janeiro, Recife and São Paulo with 39 staff. The British Council’s budget for Brazil is £3.35 million in 2011Ð12, of which £2.5 million is grant-in-aid.
English Our English activities are in four broad areas: policy, teachers, learners, examinations. In 2011Ð12 at the policy level we will commission “English Next Brazil” to promote dialogue on the role and influence of English in meeting Brazil’s economic and development aspirations and this will lead to an International Conference in 2012Ð13. English language levels in Brazil are low and there is strong demand evidenced by the strength of the private language school network—the 8 largest schools currently have 4,000 branches across Brazil teaching cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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more than two million students. We support teachers across Brazil through our free-access websites and a range of courses and e-courses delivered with partners such as Braz-Tesol, the largest teacher network in Brazil. 87% of young Brazilian aspirants consider professional development and English for work as a priority. In 2011Ð12 we will support them through free-access online resources, mobile apps, and courses and learning materials for career pathways: English for IT, English for Hospitality and Tourism, English for Insurance. Our Exams service will support 3,000 Brazilian young professionals to achieve an international qualification or to take post- graduate courses in overseas institutions.
Arts In 2011Ð12 a new MoU will be signed between DCMS, the Brazilian Ministry of Culture, the British Council and Arts Council England to launch “Connections through Culture UK–Brazil”, a three-year programme focussed on building strong relationships between cultural institutions in the two countries. We will organise a UK Contemporary Theatre Mini-Season in São Paulo and the Akram Khan Contemporary Dance Company will tour three major cities. At the Conexões Youth Theatre Festival 16 youth theatre groups from all parts of society will present new work from UK and Brazilian playwrights. UK Season in Brazil 2012Ð13. The British Council is leading on the Creative UK strand of the UK Season and supporting Embassy-led Innovative UK and Live London strands. In 2011Ð12, we will focus on branding, fundraising and legacy including the establishment of a Creative UK curatorial group.
Education and Society In 2011Ð12 we will work with 1,000 schools across the country through our Connecting Classrooms project providing curriculum based project collaboration with schools in the UK and other countries. Our three-year UK-Brazil Higher education programme will create five new HE strategic alliances between British and Brazilian HE institutions in agribusiness, biosciences, marine technology and petrochemicals. This will result in a significant increase in the flow of PhD students between both countries. We will develop a series of high profile UK FE and vocational training road shows in sectors with significant skills gaps and showcase UK expertise in meeting the skills needs of the London Olympics. Our Sports education programmes will be strengthened in 2011Ð12 through collaboration with the Ministries of Sports and Education and the UK’s Premier League. A Study Visit to the UK led by the Minister for Basic Education will lead to proven British Council programmes being integrated into schools across Brazil as part of a government programme aimed to reach up to four million students by 2014. Premier Skills is a partnership between the Premier League and the British Council, which uses football as a tool to engage with and develop the skills of young people. The Premier skills project will be developed through study visits in Brazil and in the UK and there will be a pilot programme in Rio de Janeiro. 27 May 2011
Written evidence from the BBC World Service
BBC Global News in Brazil Brazil is South America’s biggest media market and media ownership is highly concentrated. Home-grown conglomerates dominate the market with TV and radio networks, newspapers and pay-TV operations. The constitution guarantees a free press; vigorous media debate about controversial political and social matters is commonplace. When it became apparent that online access to the BBC was more popular than conventional radio broadcasting, the Portuguese for Brazil radio service was closed (in 2006) and investment was made in the online service in order to enrich its content. The BBC currently offers online (Portuguese and English) and TV (English) services. The audience estimate for 2010 was as follows: Online: 1.4 million unique users Combined online, World News TV & bbc.com (news): 1.8 million As a result of the Government’s 2010 Spending Review cuts to the World Service, the Portuguese for Brazil Service is tasked with ongoing efficiencies of up to 10%, but because the Service has not undergone any platform changes or reductions in output hours, we are not predicting that this will have a big impact on the audience size. 27 May 2011 cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Written evidence from BG Group 1. BG Group entered Brazil in 1994 and has interests across the energy chain. We have a controlling stake in Companhia de Gás de São Paulo—Comgás, the country’s largest gas distribution company; approximately 10% share in the Bolivia-Brazil pipeline that transports gas from Bolivia to Brazil; and exploration and production acreage in five offshore blocks. 2. BG Group has invested $5 billion in Brazil since 1994. Activities over the next decade will see us invest a further $30 billion, making us the largest British investor and one of the largest foreign investors in the country. 3. BG Group is also planning to base the company’s Global Technology Centre in Brazil, expecting to spend around $1.5 billion on R&D by 2025. 4. The main focus of our activities at the present time is in partnering Petrobras in exploration and production activities in the massive “pre-salt” oil discoveries in the Santos Basin. BG Group first acquired acreage in the Santos Basin in 2000 and secured ten new blocks in 2006, eight of them in partnership with Petrobras. BG has built up interests in acreage in excess of 6,000 sq km in the Santos basin, either in shallow or ultra deep waters and has taken part in many of the pre-salt discoveries Petrobras has made. We estimate the BG Group net share of reserves and resources from the pre-salt discoveries at around 2.8 billion barrels of oil equivalent and that peak production will reach 550,000 barrels of oil equivalent a day by 2020 (net to BG Group). 5. Brazil is a key growth asset in the BG Group portfolio offering significant reserves, ease of access to world crude markets and a growing domestic gas market. 6. Against this background, BG Group believes it is extremely important that HMG focuses on developing its bilateral relationship with Brazil as a foreign policy priority. 7. More details on BG Group’s Brazil business can be found in the 2010 Annual Report and the BG Group 2010 Data Book. Both are available on the BG Group website www.bg-group.com. 6 June 2011
Supplementary written evidence from Mr Jeremy Browne MP, Minister of State, Foreign and Commonwealth Office Thank you for the invitation to appear before the Committee on 8 June, and for the opportunity to discuss the Government’s plans for a revitalised relationship with Brazil. As I said at the time, the FAC’s interest in Brazil is greatly welcomed, and I hope that your visit was both productive and informative. I committed to writing with further detail on three points. First, please find enclosed a copy of the Brazil network’s country business plan, which is very closely based on the classified strategy adopted by the NSC.4 Although unclassified, this is not a public document. Second, you asked what steps the British Government is taking to try to get Brazil to adopt a more positive and constructive attitude towards the international Arms Trade Treaty. Brazil has been a vocal supporter of an Arms Trade Treaty (ATT) since the initial ATT Resolution in 2006. In its statement at the Preparatory Committee meeting in March, Brazil expressed reservations regarding reporting on aspects of the Treaty’s scope—specifically about whether all items and transfers within the scope of the ATT should be treated in the same way. The UK is committed to securing an effective and transparent ATT, and believes reporting on arms export licences should form an important part of this. Brazil remains a key supporter of an ATT, so we will work closely with them to try to address their concerns on reporting. We will hold ATT discussions as part of an FCO official-level visit to Brazil in July, when we hope to understand better the underlying cause of Brazil’s reservations. Last, you asked about Brazil’s non-signature or non-ratification of key human rights conventions. Through our Embassy in Brasília we have regular discussions with the Brazilian government about human rights, and welcome President Rousseff’s recent statement that she intends to make this a much stronger element of Brazil’s international policy. The EU-Brazil Human Rights Dialogue is an important part of this discussion, in which the UK is an active participant. The latest talks, on 26 May in Brasília, were wide-ranging and open, with substantial engagement from the Brazilian side. Brazil has not accepted the amendment to Article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination. Respect for individual rights irrespective of race, colour, descent, or national or ethnic origin is a key theme of our discussions with Brazil, including during my visit in May this year. Brazil has certainly made some progress in its protection of individual rights. Its recent vote in favour of a Special Rapporteur on Human Rights for Iran was extremely welcome. The UK Government has not discussed the amendment to Article 8 specifically with Brazil, but I have asked our Embassy in Brasília to encourage Brazil to accept it. 4 Not printed. cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Brazil has also not accepted the amendments to Articles 17 (7) and 18 (5) of the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. The UK Government has not discussed the specific issue of Articles 17 (7) and 18 (5) of the Convention with Brazil, but I have asked our Embassy in Brasília to encourage Brazilian acceptance of them. This year the British Embassy in Brasília will be delivering a human rights project ‘Combating torture and criminal justice violations in Brazil’, through the International Bar Association’s Human Rights Institute, which aims to have a positive influence on Brazilian government policies in this crucial area. The FCO is also funding work in Brazil by the Association for the Prevention of Torture on effective implementation of the Optional Protocol to the Convention against Torture, which Brazil has ratified.
It is correct that Brazil has neither signed nor ratified the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights. Neither has the UK. As these rights are realised progressively we do not believe they lend themselves to third party adjudication in the same way as civil and political rights and are sceptical of the practical benefits of the individual complaints mechanism. We have not discussed with Brazil its own position on the Optional Protocol.
It is also correct that Brazil has neither signed nor ratified the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families. The UK has also not signed or ratified the Migrant Workers Convention because we believe that migrants are already well protected under international human rights law, a position which Brazil shares. The rights enshrined in treaties like the International Convention on Civil and Political Rights and the Convention Against Torture apply equally to all individuals within a State’s jurisdiction, and therefore we do not see the need for a separate convention on migrants.
Since my appearance before the Committee I have taken part in the delegation to Brazil led by the Deputy Prime Minister, along with three other Ministers, twenty business leaders, Vice Chancellors, cultural representatives and sports officials. This proved yet another positive step forward in the relationship, with a number of significant announcements on trade, education exchanges, science and innovation, development partnership, public security and Olympic cooperation.
I look forward to reading the Committee’s final report. 1 July 2011
Letter to the Chair of the Committee from Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, FCO
Thank you for your letter of 23 June on your recent visit to Brazil. Elevating our relationship with this emerging power is a key objective of this Government. The Committee’s interest in Brazil is welcome indeed and a further demonstration of our aim to increase bilateral links across the board.
The British Government’s position on the Falklands is of course clear and longstanding: we have no doubts about our sovereignty over the Islands, and the Falkland Islanders’ right to determine their own political future is paramount. Whilst we welcome discussions with Argentina on a range of issues, including the South Atlantic, we are not prepared to discuss the sovereignty of the Falkland Islands against the wishes of the Falklands people. Brazil is fully aware of our position.
On the particular instance you raise, our Ambassador made a judgement that the Committee’s meetings with the Brazilian Congress were not an appropriate opportunity to discuss the Falklands as the Congress is not involved in policy on the issue. Media reporting of any discussions could have set back our efforts to find practical ways forward with the Brazilians.
I should stress that we are not shy about raising this issue with Brazil. But we need to do so in ways which maximise our prospects for success, which is not always in the full glare of media and public scrutiny. You mention the Daily Telegraph article of 21 June. The tone of this article did not reflect the main focus of the Deputy Prime Minister’s visit, which was to boost trade and investment links. But the Deputy Prime Minister did raise the Falklands issue with Foreign Minister Patriota. I and others will discuss South Atlantic issues with Defence Minister Jobim during his visit to the UK this week.
I fully support the Committee’s inquiry into the wide range of issues around our relationship with Brazil, including your interest in South Atlantic issues. If the FCO can be of any further assistance in this regard, we stand ready to assist. 4 July 2011 cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Letter to the Chair of the Committee from Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, FCO I am writing in response to your letter of 23 June requesting background on why HMS Clyde was refused permission to dock in Brazil in late 2010, and subsequent discussions with the Brazilian government in relation to the Falklands. I can confirm that in January 2011 HMS Clyde had planned to make a routine port stop in Rio de Janeiro, but did not get diplomatic clearance to do so. Whilst it is within any country’s right not to receive visits from foreign ships, and we must respect such decisions, we were very disappointed by this development. We value the close military and naval relationship between Brazil and the UK and see these kinds of visits in that context. I and the National Security Adviser both raised UK concerns with Brazilian counterparts at this time, and we have had subsequent discussions with the authorities in Brasília, including most recently by the Deputy Prime Minister in his meeting with Foreign Minister Patriota in June. Our aim is to find a way forward which meets Brazil’s concerns whilst preserving, and indeed enhancing, the defence relationship between our two countries. The visit this week to the UK of the Brazilian Defence Minister, Nelson Jobim, offers an excellent opportunity to take this agenda forward. 5 July 2011
Letter to the Chair of the Committee from Robin S. Quinville, Minister Counselor for Political Affairs, Embassy of the United States of America It was a pleasure to see you on 14 July at our meeting with Harold Koh. I am writing in response to your question on the recent Organization of American States (OAS) declaration regarding the Falkland Islands. Argentina regularly raises the issue of the Falkland Islands in multilateral forums. Since 1988, Argentina has annually tabled a declaration in the OAS. This declaration is passed by consensus, with no vote, and has passed every year since its introduction. The most recent declaration, “On the Question of the Malvinas Islands,” passed at the OAS General Assembly on 7 June. As your Government is aware, the U.S. government speaks neither for nor against this declaration. Media claims that this year the United States sided with Argentina on this issue are unfounded, as our position remains unchanged. 14 July 2011
Further written evidence from the Foreign and Commonwealth Office In order to complete the Committee’s inquiry into UK-Brazil Relations, the Committee requested further information on four points in a note from the Clerk on 26 July. In order to co-ordinate a quick response, the FCO has consulted relevant government departments, including HM Treasury, the Home Office and DEFRA. A response to each of these additional questions in turn is provided below.
1. The Committee are aware of ongoing negotiations between the UK and Brazil over a double taxation agreement. Could the Committee be provided with an update on negotiations, and potential sticking points, a timeline for completion of negotiations and the Government’s formal position? The UK and Brazil have negotiated a tax information exchange agreement (TIEA), which will be signed later this year. There are presently no negotiations taking place on a double taxation agreement—previous discussions have not come to fruition owing to the differing treaty policies of the two countries.
2. Various parliamentary committees have highlighted changes to student visa regulations as problematic. Given President Dilma’s public commitment to having up to 75,000 Brazilian students studying abroad by 2014, could the Committee be provided with a summary of the recent changes, their expected impact on the UK university sector, the effect these changes will have on overseas students (particularly Brazilian students) studying in the UK, and any conversations that HMG have had with the Brazilian authorities about these changes? The Government recognises the important contribution that international students make to the UK’s economy, and to making our education system one of the best in the world. The brightest and the best students who have the greatest contribution to make to the UK will continue to be welcomed under the student route. We believe stricter controls will be in the best interest of legitimate students. In amending the student visas regulations, the Government’s objectives are to: — reduce net migration overall by the end of the current Parliament; — reduce the areas of the student route that are prone to abuse; — improve selectivity of students to the UK, to ensure they are the brightest and the best; — restore public confidence in the immigration system; and cobber Pack: U PL: CWE1 [E] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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— ensure that the system is robust and practical to enforce. Once the system is fully implemented we estimate there will be around 70,000 fewer student visa grants a year and around 20,000 fewer visas issued to dependants each year. In addition, closing Tier 1 Post Study Work in April 2012, but retaining a route into skilled, sponsored employment through Tier 2 should result in 20,000 fewer each year staying in the UK to work. Once all changes have been implemented in 2013 we expect that we should see a reduction in net migration numbers of around 60,000 a year. It is anticipated that the changes will have the greatest impact on the privately funded, further education sector. Following an initial statement of intent in June, President Dilma officially announced the “Science without Frontiers” programme on 26 July 2011 with a target of increasing the number of Brazilian students in science, technology and engineering-related subjects spending a period of their study abroad to 75,000 by 2014. A number of countries, including the UK, have been approached by the Brazilian government as a preferred destination for a portion of these students. The British Embassy in Brasília has held discussions with the Brazilian Ministry for Education, Ministry for Foreign Affairs and Research Council equivalent (CNPq) on how such a scheme might work within existing UK migration constraints. This would involve selected Brazilian students spending a period of less than twelve months at a UK institution as part of a wider course of study. The Embassy and British Council have also highlighted this programme to the UK education and private sectors and facilitated discussions between interested parties. In June, a British Council-organised roundtable between UK and Brazilian Vice Chancellors took place in Brasília, attended by visiting UK Ministers David Willetts and Nick Clegg and the Brazilian Minister of Foreign Affairs, on the education sector response to President Dilma’s proposal. Discussions were positive with a commitment to set up a UK-Brazil implementation group to take forward higher-education co- operation agreed. The UK group will report to David Willetts. Further Vice Chancellor-led discussions are expected to take place in the UK in the autumn. BG Group—the largest foreign investor in Brazil—announced in June that it would fund the UK costs of the first tranche of science and technology students to spend one year of their studies at a UK university. Funding will be provided from the 1% levy Brazil requires companies operating in certain designated oil fields to invest in indigenous R&D and educational programmes, benefitting both the British and Brazilian economies. BG Group’s contribution is likely to cover up to 450 scholarships over the next 4 year period. The Brazilian government has pledged to provide USD 30,000 per student to cover tuition fees and other costs.
3. The Rio+20 Conference takes place next year. What is the Government’s formal position going into the conference and what does it anticipate achieving? Who will represent HMG at this conference and, if possible, what advice has been received from the Ambassador re: a Government representative? Brazil will host the UN Conference on Sustainable Development (Rio+20) from 4 to 6 June 2012. The conference will mark the 20th anniversary of the original Rio Earth Summit and will have two themes: green economy in the context of sustainable development and poverty eradication, and institutional framework for sustainable development. Brazil has ambitious plans for Rio+20 and is planning substantial business and civil society components, with special sessions just before the main conference. Rio+20 offers an important opportunity to promote the UK’s international growth agenda. It will address the interlinked challenges of climate change, food, energy, water and resource security, in particular to emphasise the underpinning role of natural resources in sustaining growth and lifting people out of poverty. Rio+20 will consider the institutional arrangements required to improve policy coherence and efficiency. The Government’s position is being developed. Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs, is leading the UK’s preparations and is developing a coherent vision across government, in collaboration with her Cabinet colleagues. Mrs Spelman is working closely with the Brazilian government to make Rio+20 a success. She visited Brazil in April and remains in close contact with her Brazilian counterparts. Mrs Spelman will be at Rio. Decisions on which other Ministers should attend will be considered as part of our preparations. The British Embassy in Brasília continues to be in close contact with interested departments both in Whitehall and in Brazil on preparations for Rio+20.
4. What is the Government’s opinion on human rights in Brazil? Which areas require improvement, what discussions have Government Ministers had with their Brazilian counterparts? The UK Government welcomes President Dilma’s determination to strengthen human rights as a priority of her leadership. Brazil has ratified most major international human rights conventions. Evidence of Brazil’s more positive approach internationally is illustrated by its vote in favour of a Special Rapporteur on Human Rights for Iran in the Human Rights Council in March 2011. The Brazilian government is open to discussion of human rights issues. The UK supports human rights work in Brazil, primarily through the EU, with European Instrument for Democracy and Human Rights (EIDHR) projects in access to justice, supporting human rights defenders, child rights, indigenous rights and prisoners’ rights. This year the British Embassy in Brasília will work with the International Bar Association in implementing a £118,000 FCO-funded project entitled ‘Combating torture and criminal justice violations in cobber Pack: U PL: CWE1 [O] Processed: [14-10-2011 11:41] Job: 012644 Unit: PG04
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Brazil’. The FCO is also funding work in Brazil by the Association for the Prevention of Torture on effective implementation of the Optional Protocol to the Convention against Torture. The Brazilian government itself recognises that there is still progress to be made on a number of challenging domestic human rights issues. These include violence and discrimination against women, discrimination and exclusion of Afro-Brazilians and indigenous people, rural violence and land conflicts, public security, police violence (including extrajudicial killings and torture), prison conditions and human trafficking. UK Government Ministers regularly discuss human rights with their Brazilian counterparts. Most recently, on 16 May FCO Minister Jeremy Browne held a roundtable discussion with Brazil’s Minister for Women, Minister for Racial Equality, senior officials from the Human Rights Secretariat and other government ministries and NGOs during his visit to Brazil. Participants discussed improvements to the domestic situation in Brazil including torture and inhuman conditions in prison, forced labour, and ensuring equality for women, children, LGBT5 and indigenous and black populations. They also touched on the creation and strengthening of national institutions, such as the Human Rights Secretariat. Jeremy Browne also met the Brazilian Minister for Justice Jose Eduardo Cardozo. They discussed cooperation on security and criminal justice issues and a UK-Brazil Memorandum of Understanding on security and crime. The British Embassy in Brasília holds forms of stakeholder meetings with NGOs on human rights in Brazil, through the EU human rights group. Most recently, the EU Delegation in Brasília organized a Human Rights group meeting in order to facilitate the Movimento Indígena de Renovação e Reflexão do Estado de Amazonas' request to reach out to the EU and its Member States and inform them about the struggles of indigenous communities in the Amazon region, particularly in Manaus. The UK will continue to support Brazil to improve human rights issues in these areas. 15 August 2011
Further written evidence from the Foreign and Commonwealth Office The Committee Clerk wrote to the FCO on 24 August requesting an FCO response to an article published in the Sunday Times on 21 August 2011 entitled “Brazil blockade hits Falklands oil hopes”. The UK position on the Falkland Islands is clear and longstanding: we have no doubts about our sovereignty over the Islands, and the Falkland Islanders’ right to determine their own future is paramount. This view is well-known to the Committee, and to our partners in South America, including Brazil. The Government is committed to the economic development of the Falkland Islands. We are clear that the Falkland Islands Government has a legitimate right to develop a hydrocarbons industry in Falklands waters. It adheres to all domestic and international laws. While we reject any attempt to impede legitimate Falklands economic activity, it is important to note that the November 2010 UNASUR language on Falklands-flagged shipping to which the article refers is caveated with the need to adhere to “international law and respective domestic legislation”. Accordingly, we do not expect Falklands or UK-flagged commercial vessels to be refused entry into South American ports, despite pressure from Argentina. The UK has strong links with partners in Latin America, including Brazil. We will continue actively to defend the Islanders’ right to self-determination, while strengthening our relations with Brazil and the wider region through closer engagement. We have rejected, and will continue firmly to reject, both in public and in private, Argentine measures which aim to damage the Falklands economy. 22 September 2011
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5 Lesbian, gay, bisexual and transgender. PEFC/16-33-622