UK Brazil Relations. House of Commons Foreign Affairs Committee. Ninth Report of Session

Transcription

1 House of Commons Foreign Affairs Committee UK Brazil Relations Ninth Report of Session 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

2 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 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 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 ; the Committee s address is foraffcom@parliament.uk

3 UK-Brazil Relations 1 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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5 UK-Brazil Relations 3 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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7 UK-Brazil Relations 5 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 longterm 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)

8 6 UK-Brazil Relations 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

9 UK-Brazil Relations 7 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)

10 8 UK-Brazil Relations 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)

11 UK-Brazil Relations 9 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 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 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 Foreign Secretary, Canning Lecture, Canning House, 9 November Canning House is the home of the Hispanic and Luso Brazilian Council 3 BRIC is an acronym standing for Brazil, Russia, India and China. 4 See: Foreign Affairs Committee, Seventh Report of Session , East Asia, HC 860; Foreign Affairs Committee, Fourth Report of Session , South Asia, HC 55; and Foreign Affairs Committee, Second Report of Session , Global Security: Russia, HC 51.

12 10 UK-Brazil Relations 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 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.

13 UK-Brazil Relations 11 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 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 Foreign Secretary, Canning Lecture, Canning House, 9 November All quotes are from the Foreign Secretary s Canning Lecture of 10 November.

14 12 UK-Brazil Relations 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 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 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 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 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 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 Q 2 10 Q 2 11 Q 2 12 Q Q Q Q Q 95

15 UK-Brazil Relations 13 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 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 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 Q 125

16 14 UK-Brazil Relations An ambitious EU-Mercosur 20 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 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 August 2010 September 2010 February 2011 April 2011 April 2011 April 2011 May 2011 June 2011 October 2011 Minister Vince Cable, Secretary of State for Business, Innovation and Skills Gerald Howarth, Minister for International Security Strategy (MOD) Lord Brittan, Prime Minister s Special Adviser on Trade Baroness Neville-Jones, Minister of State for Security and Counter Terrorism (Home Office) Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs (DEFRA) Gerald Howarth, Minister for International Security Strategy (MOD) Jeremy Browne, Minister of State, FCO Nick Clegg, Deputy Prime Minister, accompanied by David Willetts, Minister of State, BIS, Jeremy Hunt, Secretary of State, Culture, Media and Sport and Jeremy Browne, Minister of State, FCO 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

17 UK-Brazil Relations 15 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 Changes to the FCO s global network were laid out in an oral statement by the Foreign Secretary on 11 May 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 SMS3 27 or director-general level ambassadorships. It really is one of the most highly sought-after jobs 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 campaignmode diplomacy important though some campaigns are towards trying to make sure that we get the core basics right, in terms of our diplomatic offering Ev 45, para 7 23 Ev HC Deb, 11 May 2011, cols HC Deb, 11 May 2001, col 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]

18 16 UK-Brazil Relations 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 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 He went on to suggest that the Olympics were one of the key topics of conversation between him and his Brazilian counterparts Q Q Q 127 [Angus Lapsley] 32 Q 127 [Jeremy Browne] 33 Foreign Affairs Committee, Second Report of Session , FCO Public Diplomacy: The Olympic and Paralympic Games 2012, HC Ev 45, para 8 35 Q Q 162

19 UK-Brazil Relations 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 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 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 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 Q Q Q 162

20 18 UK-Brazil Relations 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 Agreement 42 which is due to be signed later this year 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, socalled 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

21 UK-Brazil Relations 19 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 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 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 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 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 Reform of the Points Based Student (PBS) Immigration System: Impact Assessment, UK Border Agency, 1 June 2011, page See: In Brazil, a plan to send students to world s top colleges, Time Magazine, 21 September Jeremy Browne MP, Oral Evidence to Home Affairs Committee, 3 March 2011, HC 773, Q Business, Innovation and Skills Committee, Eighth Report of Session , Trade and Investment: China, HC 1421, paragraph 65

22 20 UK-Brazil Relations 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 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 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 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 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 Ev Ev Ev 70

23 UK-Brazil Relations 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.

24 22 UK-Brazil Relations 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 Democratic Brazil s foreign policy over the last 15 years has been shaped by three key figures: President Cardoso ( ), President Lula ( ) and his Foreign Minister Celso Amorin ( ). 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 rulesbased 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 21 st century. The rise of the G20 has boosted their hopes of reshaping such global institutions. Brazil wants the G20 to be the preeminent forum for economic matters beyond the global crisis (Geneva Academy of International Humanitarian Law and Human Rights) 53 Q 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.

25 UK-Brazil Relations 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). 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 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 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 P 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 Q Ev 50, para Q Ev 46, para Q 131

26 24 UK-Brazil Relations 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 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 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 nonintervention 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 Q Q Q 106

27 UK-Brazil Relations 25 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 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 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 Q Q Ev 46, para Mac Margolis, Rogue Diplomacy, Newsweek, 7 May 2010

28 26 UK-Brazil Relations 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 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 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 noninterventionists and weaken that of the West 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 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 Maria Luisa Viotti, Speech following adoption of UN Resolution 1973, 72 BRIC abstentions point to bigger UN battle, Financial Times, 18 March Q Q 103

29 UK-Brazil Relations 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 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 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 Q Q Q Q Q 147

30 28 UK-Brazil Relations 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 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

31 UK-Brazil Relations 29 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 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 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 Ev 47, para Q Q Ev 68

32 30 UK-Brazil Relations 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 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 Falklandsflagged 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 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 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 Ev 71

33 UK-Brazil Relations 31 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 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 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 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 Ev 45, para Q UK export and import in 2009, HM Revenue and Customs 95 Q Ev 45, para 14

34 32 UK-Brazil Relations 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 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 other 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 Trade and Industry Committee, Seventh Report of Session , Trade with Brazil and Mercosur, HC 208, para John Hutton Speech to Brazilian Chambers of Commerce, 28 November 2008, Dorchester Hotel Q Q Ev 45, para 7 and HC Deb, 11 May 2011, cols

35 UK-Brazil Relations 33 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 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 incountry [...] 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 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 Q Ev 63, para 6

36 34 UK-Brazil Relations 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 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 Q Q International Finance Corporation and the World Bank, Doing Business in Brazil, Brazil s labour laws: Employer, beware, The Economist, 11 March Corruption in Brazil: The Money Trail, The Economist, 25 February 2010; Brazil s Transport Minister quits in corruption scandal, BBC News, 7 July Q 93

37 UK-Brazil Relations 35 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 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 Talks were suspended in 2004 and restarted in June 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 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 Q 72

38 36 UK-Brazil Relations 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 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 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 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 Q Q Q 70ff 119 Q The sub-salt fields are found under the ocean floor, underneath a thick (approx. 2 kilometres) layer of salt.

39 UK-Brazil Relations 37 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 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 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 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 Q Q Q Q Q 10

40 38 UK-Brazil Relations degree to which the aims of the Brazilian government are supported will be crucial to success 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 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 Q 21 [Paul Domjan]

41 UK-Brazil Relations 39 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 presalt 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 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 BG Group doubles estimate of Brazil Santos Basin oil reserves, The Daily Telegraph, 30 June See, Higher gas prices and Brazil boost BG Group, The Evening Standard, 27 July Rolls-Royce wins 1.3bn deal with Brazil's TAM airlines, BBC News, 20 June 2011

42 40 UK-Brazil Relations 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 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 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 Central Intelligence Agency World Factbook, Ev 46, para Q Q 34, Ev 53 (SOCA Supplementary Evidence) 138 Q 34, Q Q 43

43 UK-Brazil Relations 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, Ameripol 141 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 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 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 American Police Community 142 Q 31 32

44 42 UK-Brazil Relations 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 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 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 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 Q 139

45 UK-Brazil Relations 43 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 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 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 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 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 Ev Ev Ev 71

46 44 UK-Brazil Relations contribution to the funding of Brazilian human rights NGOs and in its reply to us update us on its work in this regard.

47 UK-Brazil Relations 45 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 proenvironmental, climate-change-mitigating policies 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 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 cooperation at the Nagoya biodiversity and Cancun climate change meetings in 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 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 In addition, 149 Canning Lecture, 10 November Q Q Ev 46, para Q Q Q 125

48 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 G 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 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 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 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 Q Q Q Brazil forms crisis cabinet following unexpected deforestation surge, The Guardian, 20 May 2011

49 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 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 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 UNFCCC 165 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 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 Brazil s lower house approves looser forest protections, Washington Post, 26 May Q United Nations Framework Convention on Climate Change 166 Q 166

50 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 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 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.

51 UK-Brazil Relations 49 Formal Minutes Tuesday 11 October 2011 Members present: Richard Ottaway, in the Chair Mr Bob Ainsworth Mr John Baron Sir Menzies Campbell Ann Clwyd Mike Gapes Andrew Rosindell Mr Frank Roy Sir John Stanley Rory Stewart 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 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 [Adjourned till Tuesday 18 October at 10.00am

52 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 BBC World Service Ev BG Group Ev Mr Jeremy Browne MP, Minister of State, FCO Ev 67

53 UK-Brazil Relations Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, FCO Ev 68, 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 ( 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 ; archives@parliament.uk). 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

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55 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 the Committee, our first oral evidence session for the Committee s inquiry into UK-Brazil relations. The purpose of this session is to examine three discrete areas of activity in Brazil that directly affect the UK s interests: energy security, crime and the environment. I start with an apology for the fact that the witnesses and members of the public have been kept waiting. We had a rather pressing matter to attend to, and I thank you for your indulgence. I give the first three witnesses a very warm welcome. It is very much appreciated that you have taken the time to come and see us. Perhaps I could start the questioning on the oil sector. Could you set out how important you see the sub-salt fields are both to global oil production and to Brazil as an aspiring power? The recent discovery of what has been a pretty substantial oilfield there is obviously of huge economic and political impact, and I would be interested to hear your views. Mr Atkinson, do you want to go first? Neil Atkinson: I am happy to start on that one. We face a situation where demand for oil is continuing to increase at a fairly rapid rate for the foreseeable future Q2 Chair: Globally or nationally? Neil Atkinson: Globally, led of course by developing countries such as China, India and indeed Brazil itself. The issue will arise more urgently over the next decade or so of the challenges to meet that demand by finding oil and gas around the world. There are people, of course, under the heading of peak oil, who believe that the challenge of finding that supply will be more difficult than others believe. To cut to the chase, Brazil in the past few years has become an increasingly important source of future supply. The pre-salt reserves, which were estimated at something like 80 billion barrels, are an enormous find, and an enormous source of future supply. To put that into context, the current crude reserves of the UK are something in the region of 3.5 billion to 4 billion barrels, depending on whose figures you believe, and the crude reserves of Saudi Arabia are something in the region of 250 billion barrels, again depending on whose numbers you believe, so this is a very significant, almost game-changing find in global terms. As for what it will mean for Brazil itself, as I said a moment ago, Brazil s own demand for oil will continue to rise quite strongly because its population is rising fast and its economy is developing fast, so it will have a large own use for oil; however, if it is successful in developing the pre-salt reserves of 80 billion barrels, in addition to the other resources it has, Brazil will be, or should be, in a position to be a significant exporter. 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. Paul Domjan: I agree with that. I think the discovery is on a global scale, but I would argue that if we look over the next 10 years I will take this from more of a supply side than a demand side it still is primarily a Brazilian story. If we look at Petrobras s numbers, we are talking about something in the order of 1 million barrels a day in incremental production by 2020, which is 1% or 2% of global production at that stage. What we have already seen, though, is that Brazil s success with the drill bit, at expanding production, has made the world s ninth-largest energy consumer, and its eighth-largest economy, a net oil exporter, as Mr Atkinson just said, which has had a major impact on Brazil s reserves and balance of payments, as well as contributed to stabilising the world energy system. By 2020 the pre-salt will account for 25% of Brazilian production, which will make Brazil a meaningful oil exporter, with something in the range of 1 million to 1.3 million barrels a day of exports. In terms of Brazil s total economy, however, oil exports will rise from 9.5% of total exports today to approximately 38% of total exports. That increases the share of Brazil s top three exports, which we treat as a measure of export concentration, from roughly 26% to 60%, so it has a major impact on the shape of Brazil s economy, if not on the global energy system in quite the same way. One of the most important impacts on Brazil will be the debate on establishing a sovereign wealth fund. Brazil could today establish a $110 billion sovereign

56 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 maintain its import cover at seven months, which we consider a benchmark. Today, Brazil has a fund that invests in state companies, but not one that saves foreign currency earnings. Obviously, this production will be a huge source of new foreign currency earnings. For that reason, when we think about the UK-Brazil relationship, we should be thinking about the financial side as well as the oil side, because of the revenue the oil will produce. Dr Rosillo-Calle: I apologise to the Committee I have a very bad throat, so if I talk too low, please let me know. Chair: I will wave my pen. Dr Rosillo-Calle: Okay. I agree with what Paul and Neil said. One thing that has not been mentioned here is that, according to quite a few studies, Brazil has reserves of between 70 billion and 100 billion barrels, and some other studies point to even higher volumes. In future, Brazil is going to be a major player, I am convinced of that. I have my data here. 1 Brazil has about 7.5 million square kilometres of sedimentary areas, of which only 4% have been fully explored, so there is huge potential. I do not know whether more oil will be found, but all the new studies indicate that the potential is far greater than thought up till now. Another point I would like to make is that Brazil is in a unique position in the world because, contrary to many other oil-producing countries, Brazil has something unique: it has a path that will enable it to become energy self-sufficient. 2 Brazil can produce a lot of energy now and will be able to do more in the future. Brazil already produces about 46% of all energy consumed in Brazil from renewables. It also has a biofuel industry which is the most important, well developed and economically viable biofuel programme that we have in the world today. To that, you have to add the potential agricultural production. Everything is intertwined, so the country relies not only on oil but also on the biofuel, renewable energy and agriculture sector. The country has enormous policy flexibility to become a major exporter of oil and also be able to diversify the energy supply. Q3 Chair: Do you think Brazil s energy credentials are damaged by the discovery of this field? Dr Rosillo-Calle: No, I don t think so because in the past, people said, what happens to the biofuel programme if Brazil becomes energy self-sufficient if large amounts of oil are discovered? It is very difficult to say, but I think the Government have realised that keeping the biofuel programme for environmental, socio-economic and political reasons, is more important than shutting it down. The policy is to keep producing oil, become a major exporter of oil, develop the biofuel industry which will be largely used in the domestic market, and also become an exporter of biofuel, because Brazil has the capacity and skills to do so. Q4 Chair: Can you tell us how difficult it is to exploit these fields? The high costs of doing it must 1 Note by witness: there is significant data to support this view. 2 Note by witness: Brazil is already almost self-sufficient in energy and could become a significant exporter in the future. be challenging. Can you see economic difficulties with this field? Are there any lessons to be learned from the feasibility of extracting oil that we had in the Falkland Islands, which turned out to be rather expensive? Neil Atkinson: I think the Falklands is rather small beer compared to what we are talking about here. Somebody 40 or 50 years ago promised to drink every drop of oil that would be produced in the North Sea, and I am tempted to offer to do the same for Falklands oil. That is probably a reckless promise, but the Falklands is small beer. Brazil is hugely serious because of the vast quantities, but also because of the fact that a very high proportion of Brazilian oil is produced in very deep waters, so it is very technically challenging and very expensive. As we move forward, we think Brazilian production could rise to over 5 million barrels a day or so by 2020 or 2025 something like that and over 3 million barrels a day of that production will be from deep waters, which is essentially below 2,000 metres. That is a massively challenging resource to exploit, which raises questions about how it is going to be done and by whom, because forgetting the capital for a moment the expertise required to carry out investments of that type, and successfully and safely to produce the oil, is the kind of expertise that Brazil has a great deal of, or some of, but it will almost certainly require external help. To receive that external help and investment, it will need to offer an investment climate that is attractive to people with the expertise, which raises a whole new question about how it will develop the resources. They are very challenging because they are in very deep waters. The salt resources are, I think I am right in saying, probably the biggest discovery and potential development of its kind we ve ever seen around the world, although there have been other examples. Q5 Chair: With the Americans calling yesterday for an upping of production to push the price down, would a falling price actually affect the economics of this? Neil Atkinson: Yes. These are very broad indicators, but obviously the more technically challenging the prospect is, the more expensive it is to develop. There are very ballpark figures, but if the oil price were to fall it is actually quite unlikely below $60 or $50 a barrel, a lot of the more technically challenging resources, such as the Brazilian fields and other places around the world, such as the Canadian tar sands, would be questionable. However, that is highly unlikely, and in any event the call from the Americans to produce more to put the price down is a typically facile response to high gasoline prices. Q6 Chair: Will anyone have a stab at what the price per barrel would have to be to make it economically viable? Neil Atkinson: For Brazil, I think at least $30 to $40 a barrel something like that. Paul Domjan: If we think about marginal supply and the price falling, there s a lot of supply that goes before Brazil, so this isn t really a price-driven game in that sense. Supply will contract and push prices

57 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 to become uneconomical. Neil Atkinson: Operating costs are the key to keeping oil production going. Most of the production around the world is from mature fields, where the capital costs were sunk years ago. As long as operating costs have been covered, which are significantly lower than $30 or $40 a barrel in most countries around the world, it isn t an issue. Paul Domjan: I would agree that technically it is something that Brazil has the expertise to do, but if we look at the scale of the challenge financially, these are $100 million well completions, which are expensive wells and that is one of the main sources of cost. Q7 Mike Gapes: There has been a lot of commentary over the past couple of years about the impact of socalled peak oil. I am interested to know whether the Brazilian discoveries are factored in to that equation, or whether what is happening in Brazil actually changes the debate and moves the crisis point forward several years or decades. Neil Atkinson: I started analysing oil markets for the very first time in about 1980 or 1981, and at that time peak oil was supposed to have arrived by about 1990; by 1990, it was 2000; by 2000 and so on and so on. Inevitably, a day will come. The point is that the Brazilian discoveries are exciting and they will yield much higher production from Brazil as we move forward, but there are other places around the world where production is falling. Here in the UK is the most obvious example, perhaps not helped by recent tax changes or maybe they won t have an impact; we will wait and see but there are other countries where production is falling. The issue is whether technological improvements and better knowledge of reservoirs, as we gain it, will enable more to be produced than was previously expected from existing fields. So far, we are producing more than we thought, and the day when peak oil really comes when total world supply can go no higher, and will only start to fall has been pushed back well into the next decade, I believe. Paul Domjan: There is another wrinkle to it, which is important in the energy security area in particular. We can divide the world s oil into three buckets: the oil that is technically relatively easily accessible in stable, mostly democratic countries that are easy to do business in; the oil that is technically accessible in politically challenging environments, which may not be politically accessible; and technically difficult oil. That creates what I would call a political peak oil problem. We would not be in a peak if we could exploit all the resources that are out there, but there are some very large resources whether they are in the Middle East or the US outer continental shelf that are simply off the table for political reasons. Neil Atkinson: That answer will segueway neatly into the third part of the set of questions, which involves Brazil s relations with organisations such as OPEC, so I suspect that we may come back to that. Dr Rosillo-Calle: Brazilians admit that the costs of production vary. My data showed me that in some of the deep water, it is about $40, but in others it is about $50 or $60, because some of those findings are in very deep water. Brazil now offers one of the best environments for foreign companies. In fact, all the main oil companies are investing in Brazil. All the big companies are bringing their own technological know-how especially the British in the North Sea which is being applied to Brazil. There is a very important role for the UK to transfer more know-how to the Brazilian side. North Sea oil is very difficult to extract, because the weather is far rougher than it is in Brazil. There is a lot of potential co-operation here, which is already happening now that the oil companies are putting a lot of money into the Brazilian oil industry. Paul Domjan: It goes to the core of the technical challenge, which is that Tupi, the first pre-salt field, has been online for two years, so the technical challenge is addressed. This oil is successfully produced; it is technically possible. The question is then about mobilising the human capital the physical capital, the financial capital to expand that. Between now and 2014, Petrobras plans to invest something like 224 billion globally, about half of which will go into the pre-salt. But there are real questions, given Petrobras s financing situation, about whether it will be able to come up with the financial resources. If it is going to be the operator of all these fields, will it have the engineering capability and the physical plant to be able to do what it plans? Q8 Mr Watts: Can I follow that up? What opportunities are there for British companies with the discovery of the sub-salt fields? What are the Foreign and Commonwealth Office and UKTI doing to maximise the potential for the British economy out of the finds in Brazil? Paul Domjan: I can talk about the opportunities; I cannot comment on the FCO s ability to recognise them. 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. The UK is a world leader in all those areas. Petrobras will need to raise another $60 to $70 billion, if I remember correctly. The City of London is one place to do that. 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. The real competition is the extent to which there is a tension between developing a domestic industry, which Brazil is keen to do, and bringing in foreign contractors, whether they are from Houston or Aberdeen. There is a role for the FCO and UKTI: to what extent can they show the Brazilians that working with the UK is an opportunity to develop the domestic industry, rather than a zero-sum game for the domestic industry?

58 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 those opportunities? Are we out there in numbers? Paul Domjan: BG has a project there in the international oil company space. The real opportunity is not going to be the international oil companies as equity participants; it is going to be the service companies that are supporting Petrobras. That s where I think there s still a big game to be played. Neil Atkinson: There are opportunities, as we ve said. What we must remember is that there are opportunities, first, because the Brazilian opportunities themselves are good, but also because other countries around the world are becoming increasingly hostile to the international oil companies and the international equipment manufacturers, for their own reasons. It is no longer so easy for foreign companies to operate in, for example, Venezuela or Russia, and there are other examples that we could choose. One of the overall problems that the international oil companies face, as well as the manufacturers and service suppliers, is that they are opportunity constrained in many cases. Brazil is a favourable environment and a huge opportunity, so they should be all over Brazil like a rash, frankly, because it is one of the best opportunities on the planet for British companies and anybody else with deepwater expertise in particular, which we have. Paul Domjan: One way to think about this is that the regulation says Petrobras must be the operator, and it must have up to 30% stake in oilfields. Given Petrobras s financial resources, that probably means that it will have a 30% stake in oilfields, so there is 70% equity participation left to play for in the international arena. On top of that, this kind of blanket operatorship and we have seen this in other countries such as Kazakhstan, where there is a variant of it, to some extent means a lot of opportunity for foreign companies to come in as co-operators, joint operators, or as technical operators on part of the project, so there s still a lot of scope for the UK to play a part in this. Q10 Mr Watts: You touched on the decision by the Brazilian government to take more control over their oil company and also over the salt fields. What implication has that got for the future relationship between British companies, potentially, and Brazil? Paul Domjan: British companies need to understand what the Brazilian government s motivation is, respect that, and ask how Britain can help to advance that motivation. I think that motivation has, at a very high level, three components. One is maintaining a role in directing the course of pre-salt development, and that may include slowing the speed of pre-salt development to an extent. Oil often appreciates more quickly in the ground than in the financial markets as revenue. It means maintaining a substantial share of that revenue, both as licence payments, and as equity in Petrobras and dividends of Petrobras to the state. However, I think the third one, which really gives an opportunity to the UK, is developing the local oil services industry. It is about UK companies showing 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. Brazil is already, for example, in discussions with Pemex to export Petrobras expertise to Mexico. It is very pleased to be seen as a world leader in deepwater expertise, and the UK can help build that. That is particularly important if you look at the structure of the Brazilian industry. Normally, you expect a whole collection of smaller firms that are very innovative, which then contract to large firms, with technical innovations flowing down from large firms but also up from small, innovative service companies. In Brazil, technical innovation is clustered in Petrobras. The kind of community of smaller firms that make an innovative cluster is not there, so that s then an opportunity for the UK firms to help develop Brazilian subsidiaries that will meet part of the Government s goal by becoming this broader, innovative cluster. Q11 Mr Watts: Would I be putting words in your mouth if I suggested the answer to the question is that the changes have taken place? More control being taken by the Brazilian government means that the relationship between anybody and the Brazilian government will be a crucial factor in success out there. Would you go as far as to say that? Paul Domjan: I would put it slightly differently. The degree to which the aims of the Brazilian government are supported will be crucial to success. Q12 Mr Watts: To do that, you d have to have a relationship and you d have to know what they want. Paul Domjan: For certain. A lot of these smaller contractors won t have a direct relationship with the Brazilian government, but they will be supporting the Government s policy aims through their relationship with Petrobras. Q13 Mr Ainsworth: Can we shift to ethanol? Brazil has almost a monopoly of sugarcane ethanol, which has a higher conversion rate there than other forms of ethanol. What are the politics of that? Is there political significance to that monopoly and the way in which it would pan out if it was an oil situation? Dr Rosillo-Calle: I think things have changed since the alcohol program started in The industry was then dominated by domestic capital. They did not like foreign capital. That has changed and I think in the last 15 years no, less than that; maybe five or seven years the industry realised that it needed foreign capital to invest. They allow a lot of foreign capital. For example, BP has recently acquired about 60% 3 of a big company and is investing something like $300 4 million. Like BP, you have Shell and many other oil companies, and other biofuel producers in Europe are investing in Brazil. Brazil is unique because it has a long historical experience in using sugarcane, which is a very good raw material. It is very efficient and economically viable and here a distillery is the closest we have to a biofuel refinery. You produce ethanol, sugar and all the heat and electricity that you need for your operation. You have an efficient boiler and you can 3 Note by witness: should say 83% of shares. 4 Note by witness: should say $680.

59 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 national grid. On top of that, you can produce animal feed, CO 2, yeast and so on. A lot of capital is moving in now. It is opening a lot and there are many good opportunities for the UK, basically helping the Brazilians to develop sustainable criteria. I have some further points to make. At the moment, you need to ask for greater co-operation on the research and development of biofuel especially R & D on second and third generation. You need to help rather than impose sustainability criteria on the Brazilians, and there are also the agricultural issues. We need to develop a mutually agreeable certification scheme. The UK has a good experience with the renewable transport fuel obligation. It can play an important role in opening up the Brazilian market, which will be a major exporter, and the cheapest, so I think there are many opportunities for UK companies to co-operate with the ethanol production industry. Q14 Mr Ainsworth: What effect do the import tariffs that the EU maintains on ethanol have on EU- Brazilian relations? Dr Rosillo-Calle: There have been many problems and I think Brazilians have complained about that. One thing we need to do Europe and the UK, which have very strong free market philosophies is that all the import tariffs should be, if not abolished, at least reduced considerably. If you want to compete, you should not use high tariffs. We need import tariffs that are economically viable, which does not happen in Europe. There needs to be a balance here so that some tariffs might be applied, but they have to be much lower. The UK could help a lot in achieving those things. Q15 Mr Ainsworth: Why have we maintained those tariffs? Dr Rosillo-Calle: As I see it, it is because Europe basically, France has a lot of potential to produce ethanol, and the raw material is the key factor. The raw material in Europe is very expensive. Therefore, a way of protecting the domestic supply is to impose a high tariff, so you can compete. Somehow, we need to look at that, because it is not fair that the less efficient producer is supported while the more efficient are penalised. Q16 Mr Roy: Turning to oil and diplomacy, I have a three-part question. How has Brazil s oil wealth affected its foreign policy? Is it fair to characterise it as being more assertive as a result of the increase in oil? Specifically, have UK-Brazilian relations changed because of the oil wealth? Thirdly, we spoke earlier about oil prices in relation to OPEC. Will a new more aligned alliance of Brazil, Russia and so on be a direct competitor to OPEC? Neil Atkinson: I have been a camp follower of OPEC for many years. I worked for many years for the national oil company of a country that is a member of OPEC, and I used to support the OPEC delegation. I believe that OPEC is an entity that countries are more likely to leave than to join, and there is a simple reason for that. Why on earth would a country like Brazil wish to join an organisation with which it has very little in common politically, other than the ownership of large oil reserves? It wishes to see those reserves developed and attract foreign investment to help that process, but the only way it can attract that foreign investment, and indeed reward its domestic investors, is by providing a return. That return is provided by increasing production and selling the oil to markets that are growing. The OPEC countries are different from Brazil in that they are sitting on reserves that, as a proportion when set against their population and various other indicators, are absolutely enormous. They have the ability to limit their production from time to time without significantly damaging their economy, should they wish to protect oil prices. Rather like the United Kingdom in the 1970s and 1980s when production was growing, Brazil has nothing in common with any kind of OPEC strategy. I do not believe that Brazil will ever join OPEC in the same way that Kazakhstan, another rising producer, has shown no sign whatsoever of joining OPEC. Despite efforts by OPEC in recent years, Russia shows no signs of joining, and the OPEC organisation, particularly in the current environment where oil prices are very high, can continue to produce pretty well as much as it needs. It is a fairly toothless organisation these days anyway. You talk about critical relationships. The BRIC countries Brazil, Russia, India and China have held, I think, more than one summit now. There was one quite recently in India. A political entity of some sort is beginning to emerge as a grouping of the BRIC countries, and Brazil is beginning to assert its increasing wealth on the world stage. It has forged other political relationships with countries such as Iran and Venezuela. I may be missing another member of the bad boy s club ah Cuba; who could forget Cuba? Brazil is forging its own way as it becomes increasingly assertive, but I do not believe that in the long run it will join the oil producers club, because it is not in its interests to do so. Paul Domjan: I certainly agree with that. It is reasonable to say that Brazil will probably be happy with oil prices in the sort of $70 to $90 region. That would be more than adequate and OPEC is perfectly happy with that. If there is any benefit to working with OPEC, it would be only from the outside in the way that Russia occasionally does. It is important to bear in mind OPEC s desire to maintain prices. Its target price has probably risen a bit now that Saudi Arabia needs to pay for the gift that the King has just given, which is probably something like $10 a barrel in Saudi production for the next five or so years. There is another interesting wrinkle to this, which is that Brazil is in the process of shifting to a more statist approach to industrial policy. As a growing oil exporter, and a country that already has substantial foreign exchange reserves of $240 billion, there is a question about to what extent Brazil would be tempted to and choose to use its national reserves to support its national champion industries abroad. Whether that would mean taking a role similar to that of China, or a more benign role that involves less direct foreign assistance, we do not know. It may be that Brazil does not choose that path at all, but it is certainly a question

60 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 increasingly looks to China as a potential model for industrial policy. Neil Atkinson: Brazil s ultimate objective, if I understand it properly, is a seat on the UN Security Council. Q17 Chair: A permanent seat? Neil Atkinson: Indeed. Obviously, Russia and China are already there. India and Brazil are not, but they are of course rising significantly in international importance. The ultimate goal of Brazilian diplomatic policy would be to become a permanent member of the Security Council, so it will always seek to act responsibly and fairly, balancing the interests of the different blocs around the world, which is why I do not believe it would touch an institution like OPEC with a bargepole. Brazil is looking to achieve that objective to cement its place at the top table as a great country, a big powerful country with a huge industrial base and take what it thinks is its rightful place. Dr Rosillo-Calle: Brazil is very unlikely to join OPEC because the economy in Brazil is very different. You have three key sectors: oil; biofuels and renewable energy; and agriculture. Brazil doesn t depend on oil as a major revenue. It is only part of the revenue for Brazil. It is not a major revenue. Because it is very diverse, I think, as Neil said, there is no incentive for Brazil to join OPEC. Q18 Mr Roy: What unique attitude does Brazil s new oil wealth bring to its foreign policy, if any? What does Brazil have that other countries that have no interest do not have? We know that they have spent an awful lot in Haiti, for example. Do they have a favoured area or region of the world? Do they have a favoured project type mentality towards anyone else? Neil Atkinson: I am not aware of that. Dr Rosillo-Calle: My understanding is that the Brazilians so far have earned a lot of money from oil, but the money they have earned has gone into two areas. First, they have reinvested it in the oil industry for new exploration and, secondly, they have distributed it in social uses. For example, Brazil is a very unequal society. Former President Lula and the new Government are putting a lot of emphasis on reducing poverty, so a lot of funds from oil revenue are going to be redistributed across society. That is my understanding. Paul Domjan: I think it is important to keep this in perspective. In 2020, Brazil s economy will not look like Saudia Arabia s. It will not look like Kazakhstan s. It will look like Mexico s or Malaysia s in terms of the scale of oil production in the economy, so it is not necessarily a fundamental change. It will not turn into Saudia Arabia. It will still be a diversified economy. The Brazilian trade mission to China last month focused on industrial exports. The 300 business leaders went to China to sell jets, trains and manufactured goods. It is very different from what you would expect of a trade delegation from an oildominated economy. What Brazil is looking for in China is not a market for its oil. It has that. It is not an investor in its oil. It knows it can get that. It is a market for manufactured goods. We need to bear in mind that Brazil is still going to be a middle-income, manufacturing, and as Dr Rosillo-Calle said, very diversified economy. It is important that we keep bioethanol in perspective. It has been a huge success in Brazil, but that means it has displaced something like 14% to 17% of transportation fuels. It is 4% of Brazil s energy, as opposed to 41% for oil and 39% for hydro. It is an important export earner, but it s not going to drive Brazilian international policy in the way that even oil or manufactured goods would. Q19 Rory Stewart: To keep hammering the simple point: are there any specific political security or defence threats posed by Brazil s emerging wealth? Is there anything that you could see over the next 20 years which the US, the UK or the West should be anxious about? Paul Domjan: I would not say anxious. I think there is an opportunity. Mr Atkinson alluded to Brazil s desire to have a seat at the top table in international affairs. One can characterise Brazil as a responsible, developed market economy with a strong democratic foundation. It is the country that we would like to have at the top table in international affairs. We would like to shoulder a larger share of the burden. I am much less troubled by Brazil s emergence than I might be if it had happened in many other places. It is very encouraging. We just need to keep a dialogue with Brazil. The danger is to push Brazil very quickly into a sort of caricature position because it is now a major oil exporter. It does not change what Brazil is, which is not fundamentally about oil. Dr Rosillo-Calle: Brazil is not China. Brazil shares the philosophy and culture of the western world. Brazil has been very focused on either the United States or Europe. I do not think that it is possible for any Brazilian government just to refocus completely and say we are going to be totally independent. China poses a greater danger; it is a very different culture. I do not think that that will happen with Brazil. It shares too many of the values of the West. However, politics is impossible to predict. Q20 Rory Stewart: What are the implications for the UK Foreign Office in engaging with Brazil over the next 10 to 12 years? How should we be using the levers to help move Brazil into such a position? What should we not be doing? Dr Rosillo-Calle: The UK has to take into account that Brazil is unique. I say unique, because it has something that would benefit your country. It has a huge amount of energy resources. It has a lot of natural resources that are used in different ways, for example, biofuels. The Brazilians are also very keen to export agriculture products. Brazil has perhaps the greatest potential in the world when it comes to agriculture. Agriculture is very important for Brazil, for the economy and for export. Brazil is looking at the European Union especially, and the US and also China because China will import a lot of products. There are many areas on which to co-operate. Do not think of Brazil as only having one area with which to work. There is energy, agriculture and many other

61 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 rather than focusing on a particular area. That is how to keep very much involved with the Brazilians. Paul Domjan: I certainly agree. Brazil s export structure today is, first, iron ore, then petroleum, then sugars and sugar-related products such as ethanol, then manufactured goods. The real opportunity for the UK at the moment is to look at how all that is producing substantial export earnings, substantial foreign currency earnings and substantial appreciation of the real. It raises a risk and an opportunity. The risk is that Chinese economic growth falters, which is quite plausible that will be an interesting topic for a future hearing as a result demand for many of these products falters, and we have some really serious short-term economic problems in Brazil because of the collapsing commodity prices. Brazil is increasingly tied to global commodity markets, but not exclusively global oil markets. It would be a challenge for the UK to manage its relationship with Brazil and to ensure that Brazil still sees opportunities in working with the UK in that type of environment. 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. 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. It is also important because it helps to support the institutions that Brazil needs to remain a robust democracy in the face of substantial oil revenue. You need transparency about revenue, very clear rules that require revenue to be debated in Parliament, and obstacles to using revenue to win elections. One-off windfall revenues and substantial oil revenues should be saved for the future. That this generation has produced a one-off endowment does not mean that only this generation should exclusively benefit from it. Encouraging Brazil to set up that kind of revenue management framework will do a lot both to keep Brazil on the right sort of path as a responsible oil producer and to strengthen the UK-Brazil relationship. Q21 Chair: We think we have asked you all the pertinent questions, but have we missed anything? In the couple of minutes we have left, are there any points on aspects of energy security that you think we haven t covered? Dr Rosillo-Calle: One thing that the UK needs to pay more attention to is capacity building in the oil industry. It is a problem for anybody who works in the oil industry that a lot of its people are getting old. At the Imperial College, we had a meeting and all major energy users came to us saying We have a problem, and the problem was they had no sufficiently skilled personnel. Petrobras also faces this problem. The UK is in a very good position to offer local capacity building in this area through universities, corporations, grants, or whatever. I think it is an important area because the UK has been leading in the North Sea for many years and it has very good universities, which can prepare a lot of good people in the petroleum industry. Looking at the relationship between the UK and Brazil, I see that that is an area which offers good possibilities. People do not come to the UK because there is no sufficient grant or the cost of coming to the UK is too expensive. If there could be a way of having more scholarships, or something like that, it would be worth considering. Paul Domjan: 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 DTI and UKTI and everybody to be fighting against local content requirements, but local content requirements are a very reasonable thing if you are an oil-producing country. Oil production employs very few people, and it employs people with a very narrow set of skills. There are only two ways that you can really turn that into a long-term industry: you save the money and use it to develop other industries, or you export oil services. Texas, where I come from, has almost no oil left, but it produces lots of oil; it just produces it in other countries, and that has become a growth industry. 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. They are an opportunity for UK companies to become partners with Brazil and an opportunity for UK companies to establish a base from which to supply the rest of the Americas; for example, to leverage. 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. Neil Atkinson: But there will always be strong competition for skilled engineers and engineering resources from many places around the world. In a previous role, I worked in a British company offering consulting services in the oil refining industry. Finding skilled chemical engineers and other forms of process engineers to work on projects around the world was extremely difficult frankly, we were raiding golf courses to find retired people and bring them back into play. There is a very serious point that the oil industry in many parts of it is an ageing industry. Because it has tended, historically, to be a boom and bust industry, during the bad periods recruitment dries up, people are fired and they go off into other work, so when a boom returns and good days come, there just aren t enough people to staff projects. Companies are now roaming the world, looking for people with skills

62 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. Brazil, to the extent that it will need foreign expertise, which it will, will have to fight against competition from many other countries around the world. Chair: Opportunities. Neil Atkinson: Indeed. Chair: Thank you all very much. It is really appreciated that you have taken the time to come here. As we have a Division in one minute s time, I propose to adjourn until 4.15 pm if there is one vote and 4.25 pm if there are two. 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. Welcome, Mr Bishop. I apologise for the fact that we are running a bit late. Q22 Mike Gapes: Mr Bishop, can you tell us something about crime in Brazil? How serious is crime in Brazil, and how does it compare with other countries in Latin America? Mark Bishop: We can comment only on the organised crime aspect, because that is primarily what we focus on. We collaborate with Brazilian partners to combat a range of mutually important organised crime threats, including cocaine-trafficking, cybercrime, financial crime, people-exploitation and people-trafficking. Brazil is not a significant drug producer. However, 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 limited intelligence to suggest that it is a direct cocaine threat to the United Kingdom. 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. Q23 Mike Gapes: You have talked about the cocaine issue, but I am initially interested in talking about crime overall in Brazil. I understand that it has a high murder rate and that there is a serious problem with areas of the country where the security level is very low. Can you comment on that? Mark Bishop: There are, for example, 600-odd favelas shanty towns in Rio de Janeiro. The State Secretary for public security in Brazil aims to pacify some of those areas before events such as the World Cup in What the Brazilian police do is drive out the leaders of the criminal gangs through sustained action, which they follow with a phase of stabilisation, including education, public health projects and community policing to gain the trust of the area. There is some evidence of success in how they do that. Q24 Mike Gapes: Does that include an active crime prevention strategy? Mark Bishop: As part of the community policing aspect, there will be a crime prevention angle. One other additional problem that we have to touch on is Brazil s domestic cocaine problem. They have quite a significant one, second in size only to that of the US. That is growing, and it is a particular focus for our partners in the Brazilian federal police. Q25 Mike Gapes: Is that mainly based on imported cocaine? Mark Bishop: It s cocaine that is routed through the country, but a percentage of that is for the internal market. Q26 Mike Gapes: You have referred to the favelas. There have been, as I understand it, attempts in the last six months or so to have a co-ordinated clearance, including shoot-outs, and the figure that I saw was that 37 people died in the operations. Is that popular with the public? Is there a public perception that you need to take a no holds barred policy and just get the places cleaned up? Mark Bishop: This is one that, following Baroness Neville-Jones visit, the Home Office examined in some depth, and it will be able to comment in much more detail on the particular favela policy. Q27 Mike Gapes: You d rather not comment on that. Mark Bishop: I d rather not go there. I don t think that that is my particular area of expertise. That s about internal Brazilian activities. Q28 Mike Gapes: Can I ask you about prisons in Brazil? Do you have any knowledge of them? Mark Bishop: I don t. Q29 Mike Gapes: Okay. I was recently at an Inter- Parliamentary Union meeting where we had a discussion with people dealing with prison policy in certain countries in Latin America, and comparisons were made between different countries, and I would be interested to know what the perception is of what happens to people when they are locked up. Is there a rehabilitation programme? Is there a diversion programme? Or do the prison estate and the prison policy contribute to long-term difficulties? Mark Bishop: As it is not an area of SOCA s competence, it would not be right for me to comment, but I am sure that the Home Office would be willing to participate in this, if it has not already been asked to do so. Q30 Mike Gapes: A final question from me: what is being done to combat this problem of cocaine from Brazil s neighbours Colombia, Bolivia, Peru or wherever? Is there co-operation between the Brazilian

63 Foreign Affairs Committee: Evidence Ev 9 27 April 2011 Mark Bishop authorities and the Governments in those neighbouring states, or is it very much a domestic effort? Mark Bishop: It is a mixture of a number of different things: it is a domestic effort and it is Brazil engaging regionally with its partners, particularly Bolivia. One of the things that we are trying to get Brazil to engage more on is engagement further afield in locations such as Africa, where we think that it can have a real impact. 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. Q31 Mike Gapes: When you say working in Africa, do you mean that the Brazilian authorities will actually send people from their government organisations to work in African countries on a permanent basis? Mark Bishop: Yes, basically. We are looking to encourage them through things such as EU projects, SEACOP, Ameripol and others that I can go into in more depth to get much more involved in Africa, primarily through the Portuguese-speaking countries. Q32 Mike Gapes: Angola, perhaps. Mark Bishop: Guinea-Bissau is also fairly key, and Brazil has done some police training, for example, in Guinea-Bissau. 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. Mike Gapes: Thank you. That is very helpful. Q33 Mr Ainsworth: You have given us a flavour of why we are involved in Brazil, and that almost seems to be mainly drugs and associated activities. In big handfuls, what is that? Is it 80% of our interest there? Is it 50%? Is it the majority? How much of it is drugs? Mark Bishop: If we were to break it down into crime types as they affect the United Kingdom, our primary interest in Brazil is the trafficking of class-a drugs. To break it down into percentages is always difficult, but certainly it is the largest percentage of the number of parts that I mentioned at the start, which includes things like organised immigration crime and money laundering. Cybercrime is a particular area of rising concern Brazil is in the top ten list of areas of concern for cybercrime. Yes, if you have to break it down into rough proportions, tackling cocaine is certainly the largest proportion. Q34 Mr Ainsworth: It is the majority of our interest. How would you know? Do you have an office there? How many people have you got there? Mark Bishop: We have two offices within Brazil and we have a relationship with the Brazilian police that goes back the best part of 20 years, both during SOCA s time and previously as Her Majesty s Customs and Excise. They are a key partner for us, not just in tackling the cocaine that moves to West Africa and Europe, but in the influence that they can have regionally and globally. We have engaged with them on Project SEACOP and Project Ameripol, two EU-funded initiatives, to try to tie together intelligence flows in relation to South America and West Africa. There is a lot of work going on to really strengthen that co-operation. We are hopeful of signing a further memorandum of understanding this year with the Justice Minister José Cardozo, about which the Home Office can provide further detail. We have also undertaken a period of upskilling and capacity building. This isn t just about our assets on the ground; it is about what we can bring to the Brazilian police force. We have facilitated various training courses and rummage courses for vessels, which have shown immediate results. We have got them focused on container profiling and port searches by both federal police and the Brazilian customs service, with our support. There are undoubtedly issues coming up the Brazilian federal police s budget has been cut by some 20%, they have fairly small numbers, and they are obviously facing considerable pressure to tackle the domestic issues in the run-up to the World Cup and the Olympics. Q35 Mr Ainsworth: Why is Brazil not a producer country, when several of its neighbours are? Mark Bishop: I am not an expert coca grower, I think it is just not the right climate or the right location for it. There are much more conducive atmospheres. Drug trafficking, certainly the production side, as we well know from our experience in Afghanistan and elsewhere, moves towards the area of least resistance when it comes to the level of policing activity. The most productive outturn you can have in relation to Q36 Mr Ainsworth: Brazil is surely not well policed is it? It is a huge country, with massive areas of frontier land. Mark Bishop: There is certainly a very large area to police. I think when you look at Brazilian police, you have to look at capacity to undertake investigations, capability to undertake those investigations, and willingness. Those are the criteria that we normally look at when talking to and engaging with partners. In comparison with other partners around the world, the Brazilian police force is certainly a key partner and is well equipped. For example, very few other of our partners invest in pilotless drones for law enforcement activity, as they have done. They have taken possession of three pilotless drones for use in border drug operations, so there is certainly a willingness to undertake these things. Certainly geography is going to play its part, because of the sheer size and scale of the country they have to police.

64 Ev 10 Foreign Affairs Committee: Evidence 27 April 2011 Mark Bishop Q37 Mr Ainsworth: The Bolivians threw the Americans out, and I understand that we are trying to encourage the Brazilians to give some help to the Bolivians. Why would Brazil be more acceptable to Bolivia than the Americans? Mark Bishop: There is a certain element of shared borders and shared interests, and the understanding that neighbours develop over time. I do not know whether one is necessarily more palatable than the other, but when it comes to relationship building, the Bolivians appear to have expressed a preference at the moment and the Brazilians should be encouraged to develop that as much as they can. Q38 Mr Ainsworth: What is their attitude towards drugs? Do they have the same regime as there is here and in America? Do they believe that the law enforcement stream is the most important element in suppressing the drug trade and that that field needs to be chased into the production fields in the way that Britain certainly buys into? Mark Bishop: I could not comment on how Brazil approaches its public health issues or anything else. That is not for me. As for law enforcement activity, it is certainly very active, very co-operative and very effective, and that works for us. Q39 Ann Clwyd: You said that you were not an expert on the favela policy, but I understand that parts of the urban pacification programme are good and parts of it have been criticised by outside bodies. Would it be important for us to visit one of those programmes to see how the police deal with law and order and crack down on drugs? Mark Bishop: I understand that a visit is scheduled for June, in which case I certainly urge you to see what our SLO is doing with its respective partners. I am sure that that can be arranged for you. Q40 Ann Clwyd: On the point that you were making about the police, is there any conflict as there is in Peru between the police and the military over cracking down on drugs? In Peru, for example, the military seem to have all the resources, while the police do not have enough resources so there is a bit of conflict between them. Have you detected that in Brazil? Mark Bishop: Nothing has been commented on in any way, shape or form by our liaison team there. No. Q41 Ann Clwyd: Do the police co-operate with the military? Mark Bishop: As far as I am aware, the police in Brazil have a number of partners, ranging from the environmental police right the way through. Police and customs work together. I assume that the military are on the list of partners, but I cannot say for sure. I know that the Brazilian police engage with a number of partners in their activities. Q42 Ann Clwyd: Have you had any experience of the cracking down on child trafficking, which we know goes on in Brazil? Mark Bishop: Yes. As part of the work that has been undertaken, we can touch on two areas. One is the sexual exploitation of children and the work that has been done by CEOP the Child Exploitation and Online Protection team which probably takes us into the realms of cybercrime activity. As for the sexual exploitation of children, our liaison teams regularly receive intelligence from the Brazilian federal police on internet child pornography, which has been paid for and accessed in the United Kingdom. We are the bridge between the CEOP investigators and the Brazilian police force to take it forward. CEOP has said that the relationship works from its point of view. What would be useful for us is for CEOP and the UK police forces to provide feedback on the intelligence from the Brazilians. We are working towards that to demonstrate to the Brazilian federal police its paedophile unit, in particular that the UK is serious about tackling the online threat to children, and there have been outcomes from the intelligence that it has worked so hard to obtain. One of the things on which our liaison team has been working with CEOP and the Brazilian police is considering how best to tackle the emerging threat from the growing numbers of European child-sex offenders who will travel to Brazil in the run-up to the Olympic Games and the World Cup. We have to have a plan in place with the Brazilians to manage that properly. Q43 Rory Stewart: How do your resources compare with those of the United States, or any of the other major players, in engaging Brazil? Mark Bishop: Clearly, our resources are considerably less than some of our counterpart agencies. The FBI s budget last year, for example, was some $7 billion for its 14,000 agents. For our 4,000 agents it was considerably less. Q44 Rory Stewart: What does that mean in terms of working out how you divvy up work in Brazil with other international partners and how you determine how best to punch above your weight? Mark Bishop: It means that there is, as with all of our South American offices and a great number of our offices worldwide, a lot of engagement with agencies such as the Drug Enforcement Administration to determine how best we can come together to share some of the burden. It means that we are trying to encourage more and more of our European partners, such as the Bundeskriminalamt and the Spanish national police, to take some of the burden and contribute financially. It is also largely about how well we can access EU funding to try to corral some of those nations together. The two projects I mentioned earlier have gone some way towards that. Equally, there is a considerable element of working with partner agencies here in the United Kingdom. The UK Border Agency and Her Majesty s Revenue and Customs both have overseas networks, and we have been very effective in getting together and ensuring that things are deconflicted properly and that we are getting the best bang for our buck. Q45 Rory Stewart: Will you give us just one example of an area that you might not touch, that might not make sense in terms of your resources and

65 Foreign Affairs Committee: Evidence Ev April 2011 Mark Bishop that you might leave to a better resourced partner such as the United States? Mark Bishop: Certainly when it comes to the provision of extensive material support or contributions, the United States is much better resourced. We tend to focus on the provision of specialist training that can be cascaded outwards and specific smaller projects, rather than some of the bigger plans. In Afghanistan and elsewhere, for example, the United States trained the entire border police force. We certainly wouldn t do that. We would rely on the United States to commit such resources. In the United Kingdom, particularly when it comes to things such as organised immigration crime, we have engaged with UKBA, 5 which is very much focused on issues related to overstayers here in the United Kingdom, rather than an organised immigration threat. So there is that dialogue and interchange. Q46 Mr Roy: It is unprecedented for a country to be given both the FIFA World Cup and the Olympic Games in a two-year period. Presumably the chances for organised crime will be greatly increased with the many thousands of people from this country who will go to the World Cup. There probably won t be too many from my country, actually, but the chances are that there will be many thousands of people going across for the World Cup. From an organised crime point of view, it is a dry run for the Olympic Games two years later. How have our authorities affected the debate on what will happen during that two-year period? Mark Bishop: We have already contributed to the UK s assistance to Brazil s preparations for both those events. Cyber-security is part of the Olympic security 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 between the Brazilian federal police and its Metropolitan police counterpart, which is in charge of policing our Olympics, to try to ensure that as many lessons are being learned as possible. I am sure that the Metropolitan police will be delighted to provide further information on Olympic preparations that it has undertaken. Q47 Mr Roy: So do we expect large numbers of Brazilian authorities to be in London during the Olympic Games? Mark Bishop: I understand so, yes. Q48 Mike Gapes: In your answer to Rory Stewart you referred to a figure of 4,000 personnel. Can you clarify that that is your total SOCA employees? Mark Bishop: It is. Q49 Mike Gapes: How many of those are in Brazil and how many are in Latin America? Mark Bishop: We have two in Brazil. I would have to come back to you with the total number in Latin America, unless we can do a quick bit of maths behind me. I wouldn t imagine it is more than 20, but we can certainly write to you with the exact number. 6 5 UK Border Agency. 6 See Ev 53. Q50 Mike Gapes: In addition, presumably, from time to time you have people going backwards and forwards. Mark Bishop: Yes, absolutely. Q51 Mike Gapes: In your priority countries if you have such a thing in the region, is Brazil the No. 1 country that you work with or does Colombia come up the scale? Mark Bishop: Certainly, Colombia comes up the scale. I don t think we can ever really clarify it just in terms of a league table, if you like, because as I ve said for cybercrime, Brazil would be at the top. 7 For cocaine trafficking, Colombia would be at the top, probably followed by Peru and Bolivia, where certainly we are starting to see much more production taking place. Q52 Mike Gapes: What about for things such as money laundering and financial crime? Is that more concentrated in some of the countries in Central America and the Caribbean? Mark Bishop: Certainly, we are getting more concentration of that in locations such as Panama. There is a threat to the United Kingdom from money laundering in Brazil but it is currently assessed to be low. We are seeing some evidence of organised crime groups buying property in the north-east of Brazil, in order to launder the proceeds of their crimes, but Brazil has become less attractive to money launderers than it was two to three years ago. As the value of the pound, the euro and the dollar has diminished, the Brazilian real has increased; I think it is about 2.5:1 now. Q53 Mr Watts: You seemed to indicate that Brazil was perhaps at the forefront in Latin America of trying to defeat or frustrate the drug traffickers. Is that motivated by its own self-interest? Is there a growing drug problem in Brazil that is leading it to be so forthright in its opposition to the trade? Mark Bishop: There is certainly a growing internal consumption problem of cocaine within Brazil. A lot of Brazilian federal police resources, as they will no doubt tell you when you go, have been focused towards tackling this. Indeed, they have their own version of what we tried to do, namely to tackle it upstream, hence the engagement with Bolivia and others to try and get more towards the source of the problem. So yes, as with our relationships worldwide, there is always that element of self-interest, and this is perhaps where we get into the realms of this phrase that seems to be doing the rounds about law enforcement diplomacy. We may not agree with a lot of countries on territorial, nuclear or other issues, but if you turn up as a law enforcement officer and say to just about any nation, Would you like to work together on drugs and crime? the answer will be yes. It is one of those uncontentious areas, if you like. 7 Note by witness: SOCA does not have a league table or list of countries in priority order. Brazil is one of a group of 10 countries of concern in relation to cybercrime.

66 Ev 12 Foreign Affairs Committee: Evidence 27 April 2011 Mark Bishop Q54 Mr Roy: Isn t there a danger that the more we tackle the drugs and the cartels in Colombia, Peru and Bolivia, as we get more success we are actually moving the problem? The problem then moves to a bigger country, such as Brazil. Mark Bishop: There has been, for example, notable displacement of the key parts of the cocaine trade from Colombia, and indeed some of the key traffickers have found the going so hard in Colombia they have moved away to other locations. The production of cocaine we ve seen increase in Peru and Bolivia as a result of this. This, in turn, increases the risk of domestic trade within Brazil. Success in tackling the drugs trade upstream has made it more difficult for criminals to operate overall. That s one of the central principles on which we operate. As far as the UK goes, for example, this has been evidenced by a sustained low availability for highpurity cocaine in the United Kingdom since early 2009, with wholesale per kg prices at an unprecedented high. So yes, it does displace it, but we see real effect, certainly from the UK s efforts. Certainly we see real effect with other partners where we have invested a lot of time, money and effort, such as Colombia. Inevitably there is that element of squeezing a balloon, but it is about being ready for where it pops up next. Q55 Mr Roy: But isn t there a chance that the displacement goes east towards Brazil instead of the western side of South America? Therefore you are opening up the UK as a market. Mark Bishop: As we said, there is not really an element of direct interaction between Brazil and the UK. For us that has also been about building up what we do in West Africa and Europe to tackle that market. Thus, for example, we have been able to have a real impact against Serbian organised criminals, who were bringing cocaine from Brazil into mainland Europe. From there, some of the points on mainland Europe were clearly a hub for onward distribution to the United Kingdom. So if we can have an impact there, clearly, as the figures show, we are having an impact on the United Kingdom. Chair: Mr Bishop, thank you very much indeed. We are going to draw stumps there, and we really appreciate your taking the time to come to talk to us. 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 WWF: David Norman, the Director of Campaigns, and Sandra Charity, the Head of Forest Programmes. I welcome you both and apologise for the delay in the programme. As we are running late, if you don t mind, we will try to truncate this slightly, but we want to give you a good opportunity to say your bit. The questioning will be led by Rory Stewart. I don t know whether you want to make an opening statement. Should we go straight into questions? David Norman: Let s go straight in. Q57 Rory Stewart: Recently there have been some positive statements about Brazil and the environment. The Foreign Office stated that Brazil is on track to achieve targets of reducing deforestation by 80%. The Council on Foreign Relations says, Climate change has become an area where Brazil has turned its cleanenergy and environmental bona fides into a significant international voice and that Brazilians are the most environmentally concerned citizens in the world. What would you say about all these positive noises coming out about Brazilian action on the environment? David Norman: The WWF supports that. Our sense is 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 there; perhaps we could come into more detail on climate change. It is bridging the divide between the traditional bloc of developing countries, and the G77 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. It already has a pretty clean energy mix, with significant hydropower and biofuel resources. It has a strong scientific community and forest monitoring capacity. As you pointed out, it is already making progress on its Amazon targets. So yes, we are very supportive of that. Q58 Rory Stewart: Is there another side to this, particularly on the Amazon? Is there another side of the coin? Sandra Charity: One issue that has been important, from the years when the Amazon was being cleared very aggressively, is the change in policy for example, much more focus on sustainable timber production. WWF Brazil has launched and is now developing the criteria for sustainability standards for some of the main commodities exported by Brazil for example, soy and the Government are working very much with civil society to address the issues on sustainability standards. It is no longer just a focus on, Let s set up protected areas in the Amazon and have a belt of pristine forest that is untouchable ; it is looking at areas of sustainable development where they can lead and make a difference. Soy is one current example.

67 Foreign Affairs Committee: Evidence Ev April 2011 David Norman and Sandra Charity Q59 Rory Stewart: Are there things that you think the UK or the Foreign Office should be doing to help, support or in any way facilitate the Brazilian government s efforts? Sandra Charity: Our experience is that the Foreign Office has been and is already playing an important role. The recent visit by Caroline Spelman to Brazil, about two or three weeks ago, was an example of the sorts of things that the Foreign Office can continue to do. The support that the FCO is going to provide or that DEFRA is going to provide to sustainability and biodiversity dialogues in Brazil is going to be instrumental. That was welcomed by the Brazilian Minister of the Environment, and the 48 hours that Caroline Spelman spent in Brasília, which included a visit to the Cerrado, Brazil s second-largest and lessfamous biome, were very important for what Brazil is trying to do. It was very much an invite from the Brazilian government, and I think that is the way to go. Q60 Rory Stewart: Broadly speaking, you are confirming the rather positive impression that we are getting of both the Brazilian government s initiatives on the environment and the UK Government s initiatives on supporting the Brazilian government s initiatives on the environment. May I give you an opportunity to say whether there are any warning notes, cautions, negative elements or things that push against that narrative that you would like us to be aware of? David Norman: We can pick up the soya story in a little more detail. Arguably, the link between the UK and Brazil on soya is one of the fundamental environmental links, so you might be familiar with this. Soya production has doubled globally since the mid-1990s, which is almost entirely about feeding change in diets towards greater meat production, so 80% of this soya is going towards feeding livestock, particularly chickens and pigs, but also other livestock. This is an explosion, and this is very important in Brazil. It is driving, in particular, the destruction of the Cerrado. Everyone knows about the Amazon, and the existing success of the trajectory in terms of deforestation in the Amazon is already very good and on track to meet Brazil s own targets, but if you look at the Cerrado, many people have not heard about it. When Caroline Spelman shone a spotlight on that earlier this month, that was very welcome because people do not know of this Brazilian savannah, but it is responsible for about 5% of the entire globe s biodiversity. The greenhouse gas emissions caused by land use change in the Cerrado have now overtaken those of the Amazon. It is not monitored as well as the Amazon, but these are dramatic land use changes, which have biodiversity impacts as well. It is not straightforward to offer recommendations of what Governments should do differently. This is about market action and a change in global diets, but WWF has pressed particularly for recognition that the environmental impacts of soya production in Brazil are absolutely critical. For example, a certification standard such as the Round Table on Responsible Soy, where producer groups, NGOs and scientists all get together and try to set clear standards, which is a form of certification that retailers can sign up to, is again a way to make sure that soya that is imported into this country is not causing deforestation, for example. Sandra Charity: One thing to add is that the UK can continue to play, or play a stronger, role in encouraging other European countries, given that the UK operates as a bloc in many of the international conventions such as the Convention on Biological Diversity and the UNFCCC. 8 The UK can play a bigger role. Just to go back to the soy example, China is the biggest importer of soy worldwide, but the EU is the second biggest importer, so it is important for the UK to continue to work with other importing countries in the EU to make a difference. If the UK or other countries were to reduce consumption or imports of soy, all that soy would still go to China in any case, so there is a role for the UK both with the EU, but also working closely with China, which is the major pull and the major driver of soy production in Brazil. Q61 Mr Ainsworth: We are told that Brazilians are told at a very young age that they own the Amazon, so there is a certain prickliness regarding international organisations working in Brazil on conservation issues. How have you found that? Does that not make it difficult for organisations such as yours to work in Brazil, or are things getting better? What is the situation with the tension between the international desire to own the problem of the Amazon and Brazil s stated and actual ownership of it? Sandra Charity: I think that assertion is correct from some time ago. The military regime has only been out for 30 years, which, comparatively, is not a very long time, and this is something that will take a generation to change. I think Brazilians do like to feel that they control the Brazilian Amazon and that they have sovereignty over their part of the Amazon, but with the economic boom in Brazil, they have become much more open to international interest when it is genuine. We often witness that through the various international negotiations on things like climate change and the CBD. 9 For example, the last CBD in Nagoya had a strong focus on access and benefit sharing, which is potentially an area of tension, because, obviously, it includes patents and rights over genetic resources and so on, which is an example of where things could get sensitive, but Brazil is playing a more open game, at least in the view of WWF. 10 We feel that, internationally, Brazil is trying to present itself as having a more modern, more progressive angle on the environment. Yes, I think that is the trend. Q62 Mr Ainsworth: You said something about biofuel possibly being part of Brazil s policy. Is there not a downside to that? Brazil is the world s largest producer of sugarcane ethanol, and there must be 8 United Nations Framework Convention on Climate Change. 9 Convention on Biological Diversity. 10 Note by witness: WWF-Brazil is an independent and autonomous Brazilian organisation, with a Brazilian Board of Trustees which is recognised by the Brazilian government as such.

68 Ev 14 Foreign Affairs Committee: Evidence 27 April 2011 David Norman and Sandra Charity some land use and biodiversity issues. There must be another side to that, although it might be viewed as broadly positive. David Norman: There certainly is a potential downside. WWF s starting point, if you look at our energy report from the start of this year, is that if you are serious about major emissions reductions globally, biofuels are quite an important part of that. We are not in the camp that says biofuels are inherently a bad thing. The issue is about setting standards that actually have traction in terms of the social and environmental potential impacts. The question is whether biofuels are genuinely beneficial in carbon terms. All sorts of biofuels, starting with maize-based biofuels in the United States, are absolutely not good for the environment: clearly, in terms of full life-cycle carbon accounting, they are very bad. WWF in Brazil did a report three years ago that looked at this in terms of ethanol from Brazilian sugarcane. It found that Brazil s ethanol from sugarcane is probably the most efficient biofuel on the planet at the moment, which is a good starting point, but still, in terms of expansion, there is a need to look very carefully at the social and environmental impacts, particularly the social impacts. There will be dramatic changes in employment, for example, from traditional familybased farming, which is all year round labour, to highly seasonal labour, in which jobs are available only at planting and harvesting times. The environmental impacts are exactly as you said. There is a potential impact on deforestation, but even in the early dramatic expansion of sugarcane, our report suggested that this did not have very much direct deforestation impact. The critical thing, and the most difficult to control, is the displacement effect on other forms of farming, which can be displaced to other forested areas. Yes, it is absolutely essential to get it right, but we are involved in the development of the Round Table on Responsible Biofuels. The point is exactly to do this to work with industry to set clear standards that are capable of biting, and making sure that when we import those biofuels, we can have confidence that they do not have the negative impacts that are potentially there, even in Brazil. Q63 Mr Watts: You said that Brazil has made a lot of progress in environmental terms over the last few years. How much scope is there for it being a force for good among its neighbours? Is that something that interests Brazil, or is it completely nationalistic in looking at individual environmental problems? David Norman: On the global stage, it has already played a pretty important role. If you look at Brazil, South Africa, India and China in terms of their power within the G77 in the climate negotiations, certainly Brazil and perhaps South Africa played a really important role in trying to bridge that divide, being prepared to say, We also have a responsibility for setting targets, for making emissions reductions, and putting that on the table up front. That has broken through some of the impasse of saying that until the developed world had done everything, nothing was going to be done by the developing world. That has been tremendously helpful. I think there is also a partnership role in relation to forest monitoring. Brazil has very strong scientific community. Part of its success in reducing deforestation in the Amazon is based on highly sophisticated methods for tracking it and responding to continued deforestation. Again, that looks like technology that can be shared. In regional terms? Sandra Charity: Brazil is currently the main funder of many of the infrastructure projects in other countries, such as roads and dams possibly more than the Inter-American Development Bank or the World Bank, for example. It is already playing a strong regional role in promoting development and lending. Importantly from the environmental point of view, it is also keen to incorporate environmental standards in its lending policies so as to avoid, let us say, the most impacting projects. It is not always all rosy. The WWF is working with a number of bilaterals and the World Bank, so that they and the Brazilian banks are tightening up their sustainability criteria for lending. Obviously soya is a big economic driver in neighbouring countries such as Bolivia and Paraguay. From the environmental point of view, we are very keen to have more of a regional approach. That approach is being promoted by the Brazilian Ministry of the Environment, and it is something that the current Minister of the Environment has discussed with Caroline Spelman. Let us not worry only about Brazil; we must also think about the other eight countries that share the Amazon basin with Brazil. Although Brazil has 60% of the Amazon basin, there is another 40% covered by the other eight. Taking a regional approach is very much something that we would promote, and we would encourage this Government and other Governments to do so as well. We feel that Rio+20, which will happen in June next year in Rio in Brazil, is an opportunity to promote this regional approach, rather than a nationalistic approach on a country-by-country basis. At the end of the day, biodiversity and forest conservation and sustainable development depend on a more integrated collaborative approach. As we were saying, there is a lot of South-South transfer of technology between Brazil and other countries, not in only satellite imagery technology but in other aspects of productivity improvement of soy, for example and other agricultural and commoditytype economic drivers. Q64 Mike Gapes: You touched in passing on the Copenhagen negotiations and said that Brazil played an important role in those. I am interested to know how influential Brazil is, given that on foreign policy it has a traditionalist, non-interference to other countries internal affairs approach. I am not going to go there, but it abstained in the vote on Libya in the Security Council, for example. Do you think that that is changing on some issues, particularly climaterelated ones, and that that will have a knock-on consequence, as Brazil sees itself playing a greater role in the world as a member temporarily at the moment, but with aspirations to be a permanent member of the Security Council? David Norman: That is right. Because of Brazil s moral authority on deforestation issues and its having

69 Foreign Affairs Committee: Evidence Ev April 2011 David Norman and Sandra Charity 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. Also, it is partly down to the creativity of its negotiators in those UNFCCC negotiations. For example, the CDM the clean development mechanism under Kyoto came out of an idea from Brazil we are going that far back. Because Brazil has been so closely identified from the outset with the climate change issue, in the context of those negotiations, it has already been and continues to be a positive force. That speech by the then President Lula in Copenhagen was critical. He was the first person I had seen who had put down an explicit statement on the targets. He said, Brazil hasn t come here to bargain. These targets don t need external money. We will do this with our resources. That was pretty powerful because it was very different from what other major economies were saying at the time. Q65 Chair: Thank you very much. You have exhausted our questions, but do you think that we have covered everything? David Norman: Can we touch on the financing for reduced emissions from deforestation and forest degradation, which might be significant? There is a working assumption from the UK that not much money should go to countries such as Brazil that are growing strongly and are emerging economies that could be future economic superpowers. There has been quite important small-scale financing from the FCO on the ground, particularly for bringing together different actors such as the Brazilian equivalent of the CBI, 11 together with different Ministries, but in terms of significant funds on REDD, 12 this could be 11 Confederation of British Industry. 12 Reducing Emissions from Deforestation and Forest Degradation. important and WWF s view is that Brazil, as such a constructive partner, with a track record of spending that sort of money in a very effective way, proving that it is delivering global benefits in reducing deforestation and its associated emissions, should certainly be looked at. Again, we are at a stage in development internationally where there is still a lot to be worked out. It is critical that that sort of financing also has some of the safeguards that we touched on in relation to biofuels for example, a naïve approach, focused narrowly on carbon, could easily end up incentivising the shift away from natural forests, which are tremendously important not only in carbon terms but in biodiversity terms, towards plantations. That would be a disaster. This is a word of enthusiasm in terms of the potential for Brazil to spend that sort of money effectively, and of caution in terms of requiring the kind of standards to make sure that the money is spent well. Sandra Charity: To add a small point, 15 20% of global greenhouse gas emissions are from deforestation. 70% of Brazil s GHG emissions are from deforestation. That indicates how important it is to address the issue of deforestation, which will also manage to address a whole range of biodiversity, social and economic issues, if the safeguards are in place. That is key, and as David said, WWF is strongly promoting that at the moment. The UK Government is still considering the best approach to their financial commitment to addressing climate change, so it is important that a proportion of that goes for reduced emissions on deforestation and forest degradation (REDD). Chair: Excellent. Thank you very much indeed. That is really appreciated. If we have any further questions on the environment after we have been there and spoken to people, we will come back to you.

70 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 our witnesses today. This is the second evidence session of our inquiry into UK-Brazil relations. We are looking at the Government s policy on a strong commercial relationship between the UK and Brazil, and later we will examine the rise of Brazil as an international actor on the world stage. Our first three witnesses are Nicholas Armour, director of the International Group, Tony Lamb from UK Trade & Investment, and Philip Brown from the Trade Policy Unit at BIS. I welcome all three of you, and I will open the bowling. The Government say they want to increase their exports to Brazil. How will they do that? Nicholas Armour: To be perfectly honest, I don t think the Government will increase exports, but British business will do that with as much help as HMG can provide. A new UKTI strategy was launched yesterday evening, which will build on our successful track record to help to boost exports to Brazil over the years. As you know, Brazil is a designated high-growth market for UKTI, and we attack those markets through a programme of business activities in this case, in both the UK and Brazil to try to get business to take part in the undoubted growth in a BRIC country. It is a BRIC for no other reason than it is a high-growth market. We have a series of high-value opportunities that we have identified from around 60 throughout the world. There are eight in Brazil that we feel are ready for systematic exploitation, and where there is a really good opportunity for UK companies to win significant business. Some of them obviously have a competitive interest there. The Petrobras investment programme is of critical importance, and the 2016 Rio Olympics, associated with the 2014 World Cup, present a wide range of business opportunities. We are setting up some virtual project teams to ensure that we extract the maximum benefit for UK companies, where UK capability exists to meet the requirements. We expect an increasing number of ministerial visits to Brazil, and visits from people such as yourselves to build up Brazil as a normal destination for Britons to go to, whether on business or not, and to build up a relationship of yes, this is a place where we need to go and to be seen, and in a funny sort of way to make Brazil fashionable, which means that it is a place that people go to not just for tourism, culture, education and so on, but because it s a place to do good business. As with all high-growth markets, the projected GDP growth is substantially higher than we are experiencing in the developed world at the moment, so it s a good place to go to at a time when other economies are slightly flat. The FCO s commercial diplomacy programme fund will allow for a series of projects to be organised in Brazil. Along with the UKTI strategy announced last night, the Foreign Secretary announced the charter for business that the FCO is launching. It encapsulates the policy over there I say over there, because UKTI is of course an integral part of both the FCO and BIS that with increasing ministerial visits and contact with Ministers from foreign countries across the board, everyone, whatever their portfolio, should have the latest on what business and what commercial opportunities we are trying to exploit for UK companies with that country so that we can seize every sensible opportunity to push that. Q67 Chair: Can any extra help be given? Should we be coaching businesses? Are the ministerial visits useful? You briefly touched on ministerial visits and said that they were altering the culture slightly. The Lord Mayor is going. Is that useful? Do you think that we are on the right track at the moment? Nicholas Armour: I do, for the simple reason that 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, such as yours, over the past two or three years and established the Joint Economic and Trade Committee back in 2007 to take forward that element shows that there is a growing commitment. It is not enough just to visit, because we have to achieve something at the end of it. It is fine, and Brazilians like receiving visitors, because they understand the importance of it. They understand the importance of the Foreign Secretary s Canning House speech and putting Latin America there. Latin Americans generally will take heart from the network shift that is putting more resources particularly around the prosperity agenda, which the Foreign Secretary announced in the House this morning. There is demonstrable interest in Latin America, with Brazil very much within that, and we must now put the substance there.

71 Foreign Affairs Committee: Evidence Ev May 2011 Nicholas Armour, Tony Lamb and Philip Brown Visits like yours tout British excellence not only to attract inward investment, but the excellence of the product that we have to offer and that the country should be buying. To all intents and purposes, 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. Q68 Chair: As for the Government s pledge to work towards an EU and Mercosur free trade agreement, what is the state of play with that at the moment? Nicholas Armour: I will turn to Philip on that, if I may. Philip Brown: The state of play is that it was relaunched in May last year having been suspended in We have just had the fifth round, but we have not had a read-out of that yet. Negotiations are not moving forward that quickly. Normally, a free trade agreement takes a few years to negotiate. For example, we hope to conclude the India one this year, and it is nearly four years old already, so we cannot expect progress too quickly. At the moment, there are a number of sensitivities around a trade agreement with the Mercosur region. Agriculturally, the EU is incredibly defensive. Mercosur is the most competitive exporter in many of the most sensitive areas, such as beef, poultry and dairy. One of the challenges in the free trade agreement is whether the EU itself can come up with a good enough offer. The European Commission has just released a preliminary impact assessment showing that some harm would be done to particular sectors in certain countries, which means that we are at a difficult point in the EU. Because of the appreciation of the real and a number of structural issues, Mercosur itself, particularly Brazil, is quite sensitive on the industrial sector, in particular. There is protectionist interest, too. As for the progress of the negotiations, a lot of work has been done on the rules. There is already a platform to build on from where we were in There has not been an exchange of offers yet. An exchange of offers is subject to further EU consideration with particular concerns from some about the agricultural impact. Brazil and the other Mercosur countries need to go through their own processes. As for the prospects, 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. Q69 Rory Stewart: To follow up on that, there will clearly be advantages for the UK s economy from the free trade agreement, but can you talk a little about the potential negative impacts on the agricultural sector? Philip Brown: The preliminary analysis has just come out. We have had a look at it, and we have gone back to the Commission. Our Minister, Edward Davey, will be saying the same when he goes to the Foreign Affairs Council on Friday that we need to do a full analysis of it. The initial indication is that the beef sector is the biggest area that would be affected. That means that northern Scotland and Wales are two areas that this would affect. The overall initial analysis as I have said, it is just a preliminary analysis at this point shows overall net gains across the majority of sectors for Europe. Q70 Rory Stewart: Which sectors predominantly? Philip Brown: For the gains? Rory Stewart: Yes. Philip Brown: On the agricultural side, we would expect it to be the more process side, rather than the raw products, of which the UK is quite a big exporter. Scotch whisky Sir Menzies Campbell: That s a relief. Philip Brown: Yes. Scotch whisky is 25% of food and drink exports; it is one of the most effective lobby groups that we speak to. It is very keen on this FTA in terms of the opportunities that it will create for its members, particularly in the Brazilian market. It will mainly be in industrial sectors, though, that we benefit most. Mercosur and Brazil have very high tariffs 10% or 15% on average, and some are as high as 35%. We see a lot of benefit there. For us, of the main exports at the moment, pharmaceuticals is a big one. That will be very good for UK industry. There is some heavy industry as well, and chemicals; they are some of the top export areas. There is also the service industry. At the moment, we have quite a lot of UK investment there. Lloyd s, for example, is very keen to get the playing field levelled on some of the regulatory issues around insurance and reinsurance. We would also look for liberalisation and market opportunities on legal services, accountancy and financial services more broadly. Q71 Sir Menzies Campbell: I wonder whether I might go back to the generality of the approach. There has always been a sort of sense that the Americas fell within the backyard of the United States that is not very geographically accurate, but it is politically accurate. As you have described, this is a market of enormous potential. Will we find ourselves, as it were, in rivalry with the United States? If so, will there be any political fallout from that? Nicholas Armour: I will ask Tony Lamb to add anything if he wants to, but I will just say to start with that, in my limited experience of dealing with Latin America, and I come relatively fresh to this, the further south you go in the hemisphere, the less there is a pervasive American culture. Once you get beyond Columbia, it is the case that our European partners, particularly the Spaniards and so on, are our competitors in investing in those economies. Particularly in Brazil, we really do quite well, largely on the back of the oil and gas sectors the energy sectors. BG s investment in pre-sal oil exploration and so on is the largest such investment in Brazil. There may be limited sectors, but we are quite big in terms of that. Down that far, the Americans are not too much of an issue.

72 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 Latin American countries in general are looking more and more at opportunities in Europe, and they see opportunities in European markets. BNDES, the Brazilian national development bank, opened its first overseas office here in London two years ago, which will present opportunities for UK companies to invest in Brazil and for Brazilian investment here in the UK. I do not feel that we will have any major problems with our relationships with the Americans in terms of our expanding trade into Latin America. Q72 Sir Menzies Campbell: But there will be others seeking to capitalise on this emerging economy I suppose you would call it an emergent economy, rather than an emerging one. The competition may be pretty fierce. Nicholas Armour: They used to say that the city in the world with the largest number of workers employed by German firms was São Paulo that is the sort of level; it is ahead of any German city. But, then, it is a city of about 23 million. So, yes. We were hugely big in Latin America; we built the railways and all that sort of thing. Then we disinvested substantially to pay for the Second World War, and we are now finding our way back. Can I add one slight point on Mr Stewart s question? Our top five UK exports to Brazil in 2009, which is the year I have the latest figures for, were medical and pharmaceutical products, chemical materials and products, iron and steel, organic chemicals, and power-generating machinery and equipment, which supports Philip s view of the sorts of things that we are doing. Therefore, we will be happier to see lower tariffs. Philip Brown: Let me quickly add on free trade agreements from the perspective of where that stands with the US. One of the advantages of this particular free trade agreement is 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. Q73 Chair: How closely are UKTI and the diplomatic staff working on this? How integrated are they? Nicholas Armour: Totally, I suppose. Chair: After today s statement, that is what I would expect you to say. Nicholas Armour: Not only because I joined the diplomatic service 36 and a half years ago and I am still in it, although I run things in UKTI on and off Chair: Congratulations. Nicholas Armour: Thank you very much. There is one other member of my intake left, but three of us are dead. I think in London it is rather odd. We are all in Whitehall, but with the physical separation of buildings you end up working in your silos. For most of us, the experience is that posts overseas are much more integrated than London gives them credit for. Q74 Chair: How many of the UKTI team in Brazil speak Portuguese? Nicholas Armour: Almost all of them, because most of them are locally engaged Brazilians. Certainly, the director of UKTI in Brazil is married to a Brazilian. So is his deputy. His partner is also Brazilian and he served in Lisbon before. The head of our team in Rio is married to a Brazilian. Q75 Chair: So there are good geographical knowledge and language skills, which is what we are quite keen on in this Committee. Nicholas Armour: Correct. I am fully behind the Foreign Secretary s statement today. Chair: Moving on now to the trade relationships. Rory. Q76 Rory Stewart: May I begin by following up a little bit? There is obviously enormous benefit to UK exporters in this free trade agreement, but they are a bit of a threat particularly to things such as the agricultural sector from Brazilian imports. How do you, as UKTI, balance anxieties in the UK about Brazilian imports against your own agenda of promoting UK exports to Brazil? Philip Brown: 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. Clearly, you do not quite get that. We have certain areas that are most important to us, and we push hardest on those. Domestically, the European Commission, as I have mentioned, has just launched the preliminary impact assessment. It also has a sustainable impact assessment that looks at a slightly wider set of issues and some development issues. We would look at those, and we would want those to be taken into account. On the whole, our approach is that in order to get an ambitious deal there has to be movement from both sides. For example, in the agricultural sector, our DEFRA economists are looking at it now. 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 mitigate it over a long liberalisation period, so you get much more time for adjustment. That is probably the optimum way of doing it, because you still liberalise, but you do it over time. You could also look at other matters; for example, putting in place quotas, which again might restrict the level of impact and mean it is easier for the UK Government to manage and, in this case, for farmers or business. Q77 Rory Stewart: Thank you. I suppose the other anxiety about Brazil is that we are at the moment in another one of these phases of being immensely optimistic about the Brazilian economy. In the past 150 years, there have been many moments when we were immensely optimistic. Often that is driven by commodity prices, both in the past 150 years and indeed if you look at Brazil today. There are elements,

73 Foreign Affairs Committee: Evidence Ev May 2011 Nicholas Armour, Tony Lamb and Philip Brown despite all the liberalisation and progress, and some warning signs that we have an economy here increasingly dependent on commodity prices. In fact, were commodity prices lower, they would not be running a surplus at all; they would be in deficit. They are still running a relatively state-led investment programme right the way across Brazil. Are those things a concern? Do you have any comments on the structure of the Brazilian economy what its potential downsides are and what risks it potentially faces? Nicholas Armour: I do not think that any of us, in our current jobs, are economists. The Brazilian economy is booming. Undoubtedly, there are opportunities for British companies that we need to bring to their attention. If our normal global trading rivals are doing successful business there, we should be doing so, too. If I understand the implication of your question, you are saying that this bonanza may not last. 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. In our formal trade talks, there are always a lot of issues around market access and so on. As I think I have already said, I came to Latin America relatively late in my career. The one thing that has always struck me is Brazil is almost entire unto itself. It does not need the rest of the world. It has agriculture, resources, very sophisticated industrial processes, a large manufacturing base and the sixth largest aerospace industry perhaps it is fourth largest. If we all disappeared, it could live on happily, perhaps with a slight cultural loss. It is really up to us to say, They are going to go on leading lives the way they are. Let us try to seize the opportunity. Traditionally, we are a very entrepreneurial nation. We may not have the language skills, although our staff there have, but we should be seizing those opportunities. There is a huge middle-class consumer base that wants the sorts of things that we offer. As it becomes more sophisticated and opens up to the rest of the world, it will want to be a global player, so let us exploit that for what goes with it the soft power and the hard sell. Q78 Rory Stewart: What lessons can be learned from how slow the UK has been to move into the Brazilian market? It was even relatively slow 2007, I think to begin negotiations on trade barriers. Nicholas Armour: I don t know. Would somebody else like to talk while I think of an answer to that question? I deal with quite a lot of high-growth markets. I deal with a broad band from Russia, through Turkey and the Middle East, Africa and Latin America and so on. Logically, therefore, I ought to be able to compute the lessons to a model that will work successfully almost anywhere, but history and the world is not like that. Each market is, in many ways, sui generis. I mentioned earlier on the question of fashion. I have found that markets become fashionable not because Government makes them so but because business suddenly decides that this is the place they need to be. China, which is not my patch, was a fashionable market way before anybody actually made any sensible money there. Why was that so? It just became the place that you had to go. In a way, perhaps that is what Brazil should become, too. Whether it will be more successful than some of the other markets, I am afraid that I do not know. Q79 Rory Stewart: Finally, what are you doing to promote UK agriculture in Brazil? One of the great skill sets that we have in the United Kingdom is a highly productive, well-developed agricultural sector. Some of our competitors Australia, New Zealand and the United States have been very good at penetrating markets, especially China. What are we doing to make sure that British farmers in the agricultural sector are getting in to Brazil and offering all that we can to promote agriculture in Brazil? Tony Lamb: It is not agricultural, but in 2009 we signed an agreement with the International Agri- Technology Centre and Embrapa, which is the Brazilian agricultural institute, so there is a formal arrangement in place to promote closer relationships within the sector between the UK and Brazilian industry. There is activity in place. Nicholas Armour: As Philip said earlier on, we are probably better in processed foods, including whisky and so on. What we find with the high-growth markets that we are looking at we structure ourselves sectorally to a certain extent and we have our business advisory groups, or whatever they are called under the new strategy is that business people from the sector say, These are the five or six countries in the world where we feel that, with the support of UKTI and the Government more generally, we as a sector should be making a great push. We have a list somewhere of what those are for Brazil, but agriculture is not among them. To the extent that our agricultural sector is not saying that Brazil is more important for it than some other markets, we therefore tend not to say, But you ve got it wrong, O agriculture sector. As you know, the Government are very responsive to their business clients about what they want us to support them in doing. Of course, we will help to lead where we think they are missing some tricks, but if they say, No, this is where we want to be, then fine. Philip Brown: From a free trade perspective, the free trade agreement if and when it s concluded will eliminate most tariffs on agricultural goods, so the opportunity is there. Free trade agreements also deal with things such as phyto and cyto-sanitary standards so, for example, animal food and animal welfare standards might also be included in that. Those are prohibitive I don t know the details of them in Brazil at the moment. The FTA should help to eliminate those as well. Q80 Mike Gapes: You mention a number of different sectors in the economy. Which are the most important ones if our Government is to reach the goal of doubling our exports by 2015? Nicholas Armour: I should not have mentioned priority sectors, because I knew that was going to be the follow-up question. There are myriad bits and pieces of paper, but I don t actually seem to have a list of the current ones that we are looking at. I would

74 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 we have the highest number of exports; and also, to draw attention to the areas that JETCO 1 is specifically looking at, if I can find the piece of paper could you look for it? which lists the main workstreams. At the moment, the focus is very much on the infrastructure requirements that both the Olympic Games and the World Cup are going to bring, not just with getting the stadiums built, but the huge requirement for airports, the security aspects, the power that they will need and all that goes with that the whole aspect of upgrading Brazil s infrastructure to meet the requirements expected of Games in the 21st Century. Did you find that list? Tony Lamb: To add to Nicholas point in terms of the priority sectors, obviously energy is a top priority. Nicholas mentioned earlier the pre-salt finds that were discovered just off the coast of Brazil. Certainly, companies such as BG and Shell are looking at opportunities, so there are opportunities for those companies and others in the energy sector. Infrastructure, energy and in and around education as well are the areas, plus of course financial services, which we will see more and more of with the Lord Mayor s visit next month. Q81 Mike Gapes: On that point about the City of London, is that particularly important and what are you doing to promote that relationship following the Lord Mayor s visit that you have referred to? Given London s global role, how big is that in Brazil at the moment and how much bigger can it get? Nicholas Armour: HSBC, for example, has a huge operation in Brazil. It is one of its largest and most profitable in the world, so it is there. We have mentioned before that BNDES chose to set up its first other hemisphere operation here in London. BOVESPA, its stock exchange, has also set up here as well, so links are developing. President Lula was here a couple of times over the last 12 to 18 months, largely in the City, pushing that sort of thing. The Lord Mayor is going, as we know, and will take with him a range of people in the legal, insurance and financial services the sorts of companies that go with Lord Mayors. There is so much wealth in Brazil that it is inconceivable that TheCityUK which, as you know, is set up as a trade association for financial and related services in the UK should not be exploiting that to the best of its ability. Sorry to sound a little incoherent on that, but it is so important that there is a separate financial sector group that keeps an eye on that. I know they are doing that, and that is why the details are not quite at my fingertips. Tony Lamb: And Lloyd s of London has its Brazilian office up and running, which is a recent establishment as well. That is another sign of opportunities for the City. Q82 Mike Gapes: Are other countries competitors in this and trying equally hard, or does London s global role mean that people look to us first? What is happening with Shanghai, for example? What is 1 Joint Economic and Trade Committee. happening with Hong Kong? Is there a similar interest from that part of the world or New York? Nicholas Armour: New York is not too much of a problem; at least, I have not heard of it in that context in Brazil, although others will correct me if I have got that wrong. The preoccupation for Brazil vis-à-vis China is much more about competition for industrial goods. 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. To the extent to which Brazil now relies on purchases of its raw materials by China, it is building up a trade relationship with which the Brazilians do not seem entirely comfortable, as it is quite a dominating one. I think that is another reason why they are also looking to aim off a bit by developing their relationship with the EU. Q83 Mike Gapes: Can I take you back to the question of how British business can benefit? What about small and medium enterprises? We have been told that there is a lot of success in Brazil based on personal contacts. Given that British small and medium enterprises will inevitably be limited in what they can do at that level, how can they be assisted by yourselves or others to get into the Brazilian market? Nicholas Armour: The short answer is: with difficulty, largely, because of its distance and cost. Distance also involves opportunity cost. The longer answer is that, particularly under the new UKTI strategy launched yesterday and given that the focus of our current Minister for Trade and Investment, Stephen Green, is very much on the importance of SMEs to the health of the UK economy, they are fundamental to ensuring that we remain able to pay our way in the world. That is the message that he repeats regularly everywhere. We know that SMEs that export, by necessity become more competitive. Therefore, they are more robust and healthier; therefore, they last longer. SMEs that do not export have a much higher incidence of dying. SMEs are critical. What does that mean in terms of Brazil, which is a long way away? It is great if part of a supply chain leads into some of these big infrastructure projects. It is great if a bespoke-type company has a niche operation that Brazilians need or want. I just throw in some circumstantial evidence. We always knock ourselves for our inability to speak foreign languages and so on. That is why we have difficulty selling around the world. Somebody an unproven pointed out to me that in fact our SMEs are marginally better than some of our bigger companies, because they tend to go to countries where they have that personal link: they have married a Brazilian, or they have been on holiday there and met somebody drinking in a bar. What do you do? That is how they set up the relationship as an SME. It often starts from that very personal relationship, rather than in some of the big companies, which say, I have a product; I m going to come and try to establish a personal relationship on the back of that.

75 Foreign Affairs Committee: Evidence Ev May 2011 Nicholas Armour, Tony Lamb and Philip Brown Philip Brown: Let me give an example from another free trade agreement that we concluded recently, which will go live in July. It is the Korea FTA. The UKTI, along with BIS, produced a report I think it was called 100 Business Opportunities for UK Business. In simple terms, it illustrates what it would mean in terms of new opportunities, reduced tariffs and opportunities to invest in other sectors. It was quite a big launch. It was very much aimed at SMEs, because you tend to find that the big companies for example, in Brazil you have something like 4 billion of investment in the financial services sector can often find ways around the regulations, whereas SMEs find it more difficult. That is a practical example of what we can do. Q84 Mike Gapes: We have also been told about the buy Brazilian policy from the Brazilian government with regard to the oil industry. What is your reaction to that? What is UKTI s approach? Are you going with the grain, or against it? Nicholas Armour: Both [Laughter.] If you want to get across the stream to the other side and it s fastflowing, you go with the stream and edge across. There will be certain things for which you go with the flow at any given moment, because that is the way to do it. However, 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 2 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 other. There are opportunities to keep hammering away and we hope to slow the flow of contradictory and harmful currents. Q85 Mike Gapes: What about British companies cooperating in partnership with Brazilian companies as a best way to deal with the problem? Nicholas Armour: If that is what the business decides is the best way to deal with it, fantastic. Partnerships tend to work better in life. Q86 Mike Gapes: One of our witnesses said that that was the way forward. Do you encourage that? Nicholas Armour: Yes, absolutely. Part of UKTI s services is to help companies to find suitable trade partners. Q87 Sir Menzies Campbell: I wanted to ask about the opportunities provided by the Olympic Games and the World Cup, but to a large extent you have answered me, given your emphasis on infrastructure. Nicholas Armour: I have a huge list of things that I could read out if you want. Q88 Sir Menzies Campbell: They are quite good at building stadiums, though. I think that Brazil has the largest football stadium in the world. I suppose that we have a good advertisement a good shop window because our infrastructure is specifically designed for the games rather than transport or other 2 World Trade Organization. things, and it has been built on time and within budget. Is there any sense that we are trying to sell to the Brazilian Olympic authorities the expertise that went behind it? Nicholas Armour: Very definitely. We have various host-to-host agreements, and that seems to be the format that we had with the British Columbia government for the Vancouver Winter Olympics, with the Russians for the Sochi Winter Olympics and with the Brazilians for the Rio Olympics and so on. We are also trying out a new sort of project-focused approach in Brazil. There is a laissez-faire attitude in the British approach to business; everybody piles in and sees what business they can gain. This time round, we are trying to be a little more organised, particularly in the way that companies call on our services incountry. They say to themselves, Hey, hang on a bit. There is a mission being organised, by whomever, the month after next. Why not be part of that? It is about looking at specific things. We do not think that come tomorrow without any preparation is a good idea. We are trying to give that sort of steer to companies looking to win business so that it becomes more coherent. We are moderately confident. 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. In particular, we are also looking at ways for what we call the technocratic element, where we want to strengthen the UK s positioning in offering things by offering direct knowledge transfer. We have already started doing that on the whole question of the sustainability agenda around the London games. Our organisers are talking to their organisers, and their head, Henrique Meirelles, is coming in a couple of months to see what more they can learn from that. It is collaborating selling. The technocratic experience of We know what we re doing, this is how you did it, and these are the companies who did it for us and can do it for you tries to bring all that together in a whole I did not want to use the word holistic, but I may have to sort of way. Q89 Sir Menzies Campbell: In that regard, are you satisfied with the co-operation that you are getting from the Olympic authorities in this country? Nicholas Armour: Yes is the short answer. We can all be better human beings and 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. Q90 Mr Watts: Can I push you further on the partnerships? One of the problems that small and medium-sized companies will undoubtedly have is the distance between those and the time to build up networks and contacts, if you can find partners where they can use their networks and sales teams and so on. How many partnerships have you built up over the past 12 months? Can you give us some indication? You say that it is one of your priorities.

76 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 figures that we could send to you. 3 How reliable they would be, I don t know. Companies will come to us and will want their hands held right up to the altar and when the ring is put on the finger. Others will need, There s a church and there s a good verger to talk to, and they then say, Thank you very much, and that is the last we hear from them until we see in the equivalent of Hello! magazine that it has been a successful marriage. There is a whole range of ways in which one gets involved, so to get the actual figures would be difficult. This is Tony s patch, so I will let him say something in a moment, but what I would say is that, around the project approach we are taking to the Olympics, smaller companies that have been supplying into the Olympics here really need, probably, to look at going with the sorts of people whom they were working with here and go with them working in Brazil. That sort of thing will open the wider door and then the smaller SMEs will come in as part of, I suppose, the supply chain. Tony Lamb: It does not quite answer the question, but in the period between 2006 and 2009, we saw a 500% increase in the number of inquiries being fielded by our colleagues in the UKTI network in Brazil. In many respects, they would have led to some relationships. It underlines the attention that is now being focused on Brazil by companies large ones and SMEs here in the UK. Q91 Mr Watts: Could you send us any details that you have? If you are saying that it is a priority and that it is something that needs to be attended to, it would be nice to have some information to give us an indication of whether the numbers increasing tell us that you are being successful or whether there needs to be a bit more of a push in some areas. Tony Lamb: Sure. Q92 Andrew Rosindell: Obviously, Brazil is a great opportunity for British business to trade and to work with in the future, but, of course, British business needs to have opportunities that do not pose complications. Therefore, businesses need an easy way in and they do not want to be bound up in bureaucracy and regulations that prevent business from flourishing. They also need Governments who are co-operative, as well as security of investment. What are we doing to encourage the Brazilian government to get their act together and ensure that British business feels confident to invest in Brazil? If we cannot do that and are not succeeding in that way, how are we helping British business to get around some of these issues? Nicholas Armour: Let me clarify one point. I am not working hard to encourage British companies to invest in Brazil. I am delighted that they do so if it is part of making them a healthy company, and of course the Government will work terribly hard to protect 3 Note by witness: SME figures, during the period 01/04/2010 and 31/03/2011: 790 companies were offered Service Deliveries by post. The companies cover a range of sectors, notably Healthcare & Medical, Global Sports Projects, Oil & Gas, Education & Training and Construction. investments that have been made. What I want the Brazilians to do is to buy the products of British companies, preferably at a profit for those British companies. Of course, we are trying to attract inward investment, too. I fully accept that as part of selling you will need to set up partnerships and local manufacturing, but my aim is to make British companies as profitable as possible by selling fine British products, goods and services. As you identified, there are a number of issues, particularly in Brazil. The formal process for dealing with the Brazilians on that is through the Joint Economic & Trade Committee, which has met once a year since Dr Cable went over at the end of August last year with a delegation. We are expecting the Brazilian Development, Industry and Foreign Trade Minister to come back in early September. The mechanisms that we have are the major trade agreements, which Philip has touched on. If it is a trade policy issue, we have the pressure that we can put on the Brazilians to address market access concerns that companies raise with us through the EU and our bilateral mechanisms. We are also willing to offer advice to individual companies and to support them as necessary and as appropriate in lobbying on specific issues that they may have. As part of the Foreign Office s Prosperity agenda, we are looking at a wider way of helping the Brazilians to build up their capabilities and capacity in running efficient and effective customs regulatory regimes and the like, which will make Brazil an easier country and marketplace with which to deal. By definition, that will make it easier for UK companies. Does that answer your question? Q93 Andrew Rosindell: It does. Tell me how you feel about Brazil as a country. Is it a safe place to do business with, not only in terms of the stability of the country it is a stable country but in terms of corruption? There is a degree of corruption in the country still. How are we helping and advising British businesses in that sense? Nicholas Armour: I will take the macro bit to start and I hope that the others will join, if they want to. The last presidential election was the first for a long time where whoever won the election was not going to lead to a huge dip or rise in the economy. To that extent, Brazil, which always had a fantastic future, has finally reached that future. The economic and political stability seems to be there. Corruption is a difficult issue. It affects a large number of markets in which our companies do successful business. We hope that they manage to stay the right side of the Bribery Act. Those who deal with countries where there is a reputation for corruption need to tread warily. We are happy, as part of UKTI trade services and with the FCO s general advice, to discuss with companies what that may mean in their particular circumstances. There is an Overseas Security Information for Business website, which gives access to the sorts of issues that companies might face, not only on the bribery and corruption side, but on the security side more generally as well. Those are the things that businesses need to be aware

77 Foreign Affairs Committee: Evidence Ev May 2011 Nicholas Armour, Tony Lamb and Philip Brown of before they embark. That is the service we offer on the web. It is a difficult issue. Q94 Chair: Thank you all very much. I am afraid we have to move on. Thank you for the efforts you are 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 the satisfaction in the job. I hope that you find your visit useful and that it adds to the access British companies will get. Chair: We are much looking forward to it. Thank you for coming along and briefing us on what is going on. 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 on the international stage. I am delighted to welcome Professor Andrew Hurrell from Balliol College, Oxford, and Dr Marieke Riethof from the University of Liverpool. Have I pronounced that right? Dr Riethof: Yes. Q95 Chair: A warm welcome to you both. Apparently the witnesses had not met each other until today, so it is not a co-ordinated response. Let me open the bowling by asking, how important a player is Brazil on the world stage? Is it becoming increasingly influential? Dr Riethof: Brazil is a growing and booming economy, as was discussed in the previous session, so I will not elaborate too much on that. 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. In part, that happens through Brazil s focus on multilateralism. It prefers to conduct global policies through multilateral organisations like the UN. It also has an extensive range of relations formal and informal with countries around the world. In that sense, Brazil s foreign policy is focused on establishing and strengthening south-south relations in various regions. It is building on relations with developed countries the US, European countries and Japan while strengthening its regional importance, using that together with its global role to promote its international foreign policies. Professor Hurrell: I would add a few points about how we have come to see Brazil. For some people, Brazil has come out, not of nowhere, but has emerged very suddenly. There are a number of aspects to that. A previous witness talked about Brazil as a country closed unto itself. There has been a long tradition of Brazil being quite inwardly focused and tied to a foreign policy that has traditionally been quite lowkey, reticent and pragmatic. The move into the years of President Lula this very activist, personalist, voluntarist and ambitious foreign policy is a dramatic move, and it affects how we see Brazil, perhaps underplaying, for example, the extent to which Brazilian activism had been growing. In the 1990s, it was developing as a major player in, say, the dispute settlement mechanism of the WTO. That is one side. Secondly, there has been huge ignorance about Brazil in many places the United States as well as Europe. If it does not come from nowhere, it comes against a backdrop of patchy knowledge of Brazil. An earlier witness talked about making Brazil fashionable. Brazil has become much more fashionable in culture, media and music, but in terms of knowledge, media presence and exposure, and academic time and attention, there is much less certainty. The last area studies rethink in UK higher education left out Latin America. Within Latin America, there is always a question about where Brazil fits. So we have a big problem in terms of what we know and the number of people who have a knowledge about Brazil. Those are the points I would make about where we have come from. Obviously, there are the areas we have just heard about those areas where Brazil has now come on to the stage as a very dynamic player. It is active and in many areas it is what one might call a veto player; things cannot happen without it. Real questions regarding where it is going and how much it has achieved are very live issues. Q96 Chair: Their approach on the world stage has been to economically act right, but to talk left on the international stage in order to satisfy the nationalistic base. Do you think that sort of approach will continue? Where do you think they will be 10 to 15 years from now? Professor Hurrell: Brazil has been going through a period in which many things have been very positive. There has been a very benign external environment. Economically, there was the rise of China, lots of credit pouring out of the United States, and countries through the early 2000s buying Brazilian manufactured goods. Politically, Brazil could exploit a world in which, looking around at, say, the WTO, many people thought, We can t really run this any more. It s just a rich man s club. We need more players coming in. Brazil was able to play upon that perceived need for more participation and legitimacy. It has been a benign environment for the region. The United States has not really been engaged. There has

78 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 question, but over the recent period there has clearly been, if you like, room for Brazil. So we have been through a period where many things have gone well. Economically, the great political success of the Lula years, to which I think your question directly alludes, was being able to combine macro-economic orthodoxy in a sense, a continuation of many of the themes of liberalisation with, first, social programmes to broaden the political base, and then, more recently, a re-engagement with aspects of a more statist, nationalist economic policy. It is that blend which has, externally, enabled Brazil to talk to Davos and the World Economic Forum, but also to the World Social Forum in Porto Alegre. Those two sides have gone together. One of the things we need to think about, going forward, is whether many aspects of that benign environment, and that great success in combining different aspects domestically, is going to meet greater challenges. Dr Riethof: To elaborate on the point you mentioned about the role of the US in the region and what it means for Brazilian foreign policy, I would stress that Brazil likes to conduct autonomous foreign policy as much as possible. It likes independence, or not necessarily being dominated by the US. That is a driving force in the regional context and internationally. But that does not necessarily mean that there are not positive relations between the US and Brazil, which we can discuss further. I also want to stress that there is not necessarily a contradiction between Brazil s state-led development policies, its progressive social policies and its position on the international stage. There is a combination between promoting free trade and the market economy, and promoting the other policies. Q97 Chair: Do you think we need to adapt our approach to the rise of Brazil as a major global power, or are we on the right track? Professor Hurrell: It s not so much a matter of the right track ; I think it s a matter of reading where we think we are, and there are numerous we s involved in that. In the 1990s it seemed very clear: there was a coherent, developed, successful West led by the United States. Many of the prescriptions, political and economic, seemed very clear. So it was a matter of bringing emerging powers from countries like Brazil on board, socialising them and integrating them. What we have to get used to is a changing world in a more dramatic way, because the notion that the West has the answers, that its institutions work, which was already eroding, has come under much more sustained challenge through the financial crisis and a whole series of other factors. I think the big change is getting used to a world in which these are new partners. They are there round the table. It is not clear that anybody has a capacity to dictate who is at the table, or what the conditions are. That is one of the messages of the G20. So there is a very different kind of relationship who sets the agenda? We see that in terms of debates about the agenda and about responsibility who is being a responsible great power? With the United States there is the idea of being responsible stakeholders, growing out of relations with China. 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. Of course, the response on the Brazilian side is, Well, but what is responsibility? Climate change you re still the great irresponsible. So there is this debate, and it s getting used to navigating in that world, rather than in a world in which there is a potentially simple process of entry, that I think is the biggest challenge. Q98 Sir Menzies Campbell: To some extent you have anticipated and answered my question. Status equals influence, but this carries with it responsibility. Do you detect any political change within Brazil which understands that? Has the change in the presidency had any impact upon that idea? I know that there will be some specific questions about international institutions and the Security Council. Without delving into too much detail at the moment, do you detect any understanding that if you play a more important part in international institutions, you are expected not just to use your influence but to demonstrate your responsibility? Dr Riethof: First, on the possibility of change in Brazil with the new presidency, I would say that there is a lot of continuity between President Lula and President Dilma Rousseff, so there is continuity in the foreign affairs team. There is also continuity of priorities, in developing the global role of Brazil through multilateral institutions and also through Brazil s economic and unitarian role in the world, and continuing to develop and strengthen relations with neighbouring countries. There are a few small differences. First, President Dilma Rousseff seems less likely to take very controversial stances in international politics than President Lula. She also seems to emphasise human rights a lot more. That is from the first five months of her presidency. Q99 Chair: Do you believe her on human rights? Dr Riethof: There is always a mix of symbolic policy and real policy. In her case, there is a personal motivation to support human rights. Professor Hurrell: That is right. 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. Human rights is another very interesting one. There was a tendency to play what one might call hardball with human rights through some of the Lula years a justifiable critique: You re selective, You re messing around with the human rights regime, We re rising, and those sorts of ideas, and then clearly a pull-back, whether it was instrumental or more than just, that, Yes, there are certain principles, we are a democracy, we want to be a liberal country and we recognise that these are important norms. Q100 Rory Stewart: We can see a curious picture of Brazilian action in foreign affairs. There sometimes

79 Foreign Affairs Committee: Evidence Ev May 2011 Professor Andrew Hurrell and Dr Marieke Riethof may be inaction in relation to countries such as Pakistan and Afghanistan, sometimes unhelpful political action in relation to Cuba or Venezuela and sometimes eccentric action in relation to Iran, but is there any coherent, original philosophy behind that? Is there a Brazilian narrative that they are presenting? Is there an intellectual or cultural energy saying, This is Brazil s vision of the world order? Professor Hurrell: I m a little bit of a sceptic about giving too much attention to any country s grand strategies, but it is possible to identify a set of understandings about the world. For many of those associated with Brazilian foreign policy, the reason why they are confident that they have some of these things right is that they have been more right than wrong about how power is defusing and about the role of emerging countries and the need to reorientate themselves to that. They see themselves as being right in terms of the centrality of what we used to call north-south relations. There is a south-south policy, which obviously has self-interested, instrumental goals, but also has a set of normative moral claims. After all, President Lula has pressed arguments about hunger, money, transfer taxes and raising resources, so there is a clear narrative there, which is about interests and values. Even in some of the, what you term, controversial policies the idea that Brazil, and we may talk more about the region, 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. There is a narrative, but how much one can fit everything into a single grand strategy for any country is a slightly open question. Q101 Mr Roy: We know that Brazil has signed treaties and that the Brazilian constitution states that nuclear activity is for peaceful means only. What are your thoughts in relation to whether Brazil will want to have or have a nuclear weapon? I would also like your thoughts on Brazil s role in relation to nonproliferation and its role in that debate. Professor Hurrell: Again, it is an area of change. Just to be very quick, Brazil s interest in nuclear policy goes right back to the 50s. This was a phase that led through to 1975 and the West German-Brazil agreement, which was the largest transfer of nuclear technology ever to a developing country. That did not work out hugely well, both scientifically and technologically and in incurring bad relations with the US. From the late 70s to the late 80s there was the so-called parallel nuclear programme developing indigenous enrichment technology. The following decade was one in which Brazil was very much in favour of joining international regimes. That is the decade of the process that led to Brazil s adhesion to the non-proliferation treaty in 1998 the coming onboard. There is a change a discernable change in tone, in the sense that by the time we get to maybe 2004 or so, there is a return to a view that the control of our own indigenous nuclear technology, and particularly the enrichment technology that Brazil had developed and wants to develop on an industrial scale for exclusively peaceful purposes, is an important part of our national project. I think that that is very clear. The dominant, overwhelming theme of government policy has been not only that it is for those purposes, but that Brazil clearly upholds external safeguards in what it does. There are issues with centrifuges in energy plants, and there are ongoing issues with Brazil s reluctance to agree to the Additional Protocol, or anything like it. Yes, there have been statements by people in Brazil sometimes official, sometimes semi-official stating that Brazil shouldn t have signed the NPT 4 and that it should maintain a control of nuclear technology such that, in the future, it would give rise to different sorts of options. That language has grown up, but it is very much outside of official policy. For me, characterising what we have seen in the nuclear area, there is very much a re-emergence within the so-called nuclear renaissance, which may be ending now with Japan, of the idea of our technology, our development for our economic purposes, industrial purposes, commercial purposes and energy purposes. That is the thrust of where Brazil has been going. Q102 Mr Roy: So the bottom line is no nuclear weapons? Professor Hurrell: It has always been very hard to imagine what would be the real driver. There is a great debate about what drives states to acquire nuclear weapons. In the 1970s there was a latent nuclear rivalry with Argentina, not at the weaponisation level, but at the level of development. One of the great achievements of regional security in Latin America was the rapprochement and the stabilising of that relationship, which is still a stable security relationship. So what do we have? We have a potential that that relationship might unravel. Some of the Brazilian language is making Argentina think a little more cautiously about the future, but there is still nothing that really represents a threat of unravelling. We have status drivers, and surely the focus on technology such as nuclear-propelled submarines has both a defence rationale and a status rationale. More broadly, Brazil wants to be a player in a reformed nuclear order. But it is very difficult to see what might be the direct pressures, 5 which one can see in other parts of the world, that could come back to push Brazil in that direction. Q103 Mike Gapes: May I take you a step further on that? Would you say that what has been characterised by some people as a cosying up between Lula and Ahmadinejad was a personal initiative of Lula s? Or does it reflect the deep-seated view that countries have a right to enrich uranium and to have a national policy, 4 Nuclear Non-Proliferation Treaty. 5 Note by witness: that is, direct pressures to acquire nuclear weapons of the kind that one can see in other parts of the world.

80 Ev 26 Foreign Affairs Committee: Evidence 11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof and, even if they are signatories to the nonproliferation treaty, they shouldn t be treated unjustly? The arguments I have had with Iranians about not signing additional protocols are, It is an intrusion, and we are not developing nuclear weapons, and so on. Do you think that Lula really believed that? Professor Hurrell: I don t know, and we don t know. The motivations may be in the archives and, in however many years, we will know more about the individual motivations. 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. There was, above and beyond the specifics of Lula, a sense of a nuclear regime that, for many people, had been used selectively to reflect particular countries interests, but there is a right of indigenous enrichment and of legal indigenous technology. Those are quite broadly shared views of the nuclear order. There is a view in Brazil, including within parts of the military, that Brazil had been a good player in the 1990s. It signed the NPT. What happens? Look at India. India is a player that plays hardball with the nuclear order and gets rewarded. So you have that view, which, again, is not the official government view. Those ideas are there and will stay there, over and above the debates about whether the engagement with Lula was a good or bad thing for Brazil and for the world normatively or whatever it might be. Q104 Mike Gapes: Can I switch the focus? You have both referred to the fact that Brazil sees itself as a growing important player in the world. At the moment, it is a non-permanent member of the Security Council. As such, it did not vote the same way as the other non-permanent member, South Africa, on UN Resolution 1973 with regard to Libya, but in abstaining it voted the same way as India. Where in this spectrum does Brazil stand? Is it emotionally and intellectually with the traditionalist, noninterventionist view on foreign policy, or did it just feel that it could not support intervention at this stage? Dr Riethof: It is more of an expression of Brazil s traditional rejection of intervention along the lines that were proposed in the resolution. Brazil does support humanitarian missions in other fields, so I don t think it s necessarily a case of Brazil seeing it as its future role to support these kind of interventions. Brazil is probably likely to be more in the non-interventionist camp, in that sense. Q105 Mike Gapes: Does it see this as being an impediment to its taking on a leading role globally in global security, or does it think that it still wants to be a permanent member of the Security Council and so change the way that the world is shaped? Dr Riethof: Brazil sees its role as more in mediation in international conflicts than in intervention, although whether that is always realistic is a different question. Going back to the Brazil-Iran situation, that was an attempt by Brazil to prove that it was capable of mediating and negotiating a major international conflict, where it would not be necessary for the Security Council to impose sanctions. Q106 Mike Gapes: What about the aspiration to be a permanent member of the Security Council? Is that widely supported in the country? Do people recognise that it brings great obligations as well as status? Would Brazilian society generally, and the Brazilian polity, be prepared to accept the responsibilities that come with being a permanent member? Dr Riethof: Support for a major Brazilian role domestically is very considerable, so the international reputation of Brazil and foreign policy is a major domestic policy issue in presidential campaigns. Of course, as you say, that kind of role in the Security Council would require investment and potentially also participation in sanctions. If we look at the regional context, Brazil is involved in conflict mediation through the regional structure of the Union of South American Nations, but I am not entirely sure whether that translates into a recognition of the responsibilities in the Security Council. Professor Hurrell: The aspiration is a very, very longstanding one. There were debates over Brazil leaving the League of Nations in 1926 and debates in the 1940s when Brazil was on Roosevelt s possible active list as a permanent member. How much of a direct priority it is for Brazil has gone up and down, and it has come back clearly in recent years as a very major priority. Obviously, as you say, Brazil is towards the sovereignty end of the spectrum, although there has been quite a lot of movement towards ideas not of non-intervention but of non-indifference about what happens, 6 so there has been movement there. There is a big debate, though, about what the responsibility of a permanent member actually involves. It clearly involves activities in peace and security, which is part and parcel of how Brazil has seen its major role in Haiti. Does it always necessarily involve enforcement? Yes, perhaps, but there is another argument that says that 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, but you are right to suggest with a creeping recognition that there are points where, if you like, the rubber hits the road and hard decisions have to be taken. 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 domestic contestation about things like Brazil s Iranian policy. Would that translate into a high-risk foreign policy in terms of active interventionist policies? I think we have still got quite a long way to go there. Q107 Mike Gapes: What attitude should the UK have to Brazil s aspiration to be a permanent member of the Security Council? The British Government support Brazil s bid, along with several others, but that is always in the context of a complete reform of 6 Note by witness: (inside other countries).

81 Foreign Affairs Committee: Evidence Ev May 2011 Professor Andrew Hurrell and Dr Marieke Riethof the Security Council, which is not going to happen. Do you think that we should just be saying, Put Brazil on now, along with India and a few others? Or should we wait for a complete reshaping of the Security Council? Dr Riethof: Given that reform of the Security Council is a longer-term prospect, maybe. I would say that an active role could be to 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. Q108 Mr Watts: Can I just push you on Mike Gapes earlier point? Would Brazil rule out intervention, or would it accept intervention as part of permanent membership? If, in theory, it would not want to endorse any sort of intervention under any circumstances, does it see itself as a moderating force to add something different than exists at the present time? What is the motivation for them? Professor Hurrell: One needs to unpack a little bit the idea of intervention, because, as I said and as you have heard, certainly within the region, the movement towards a notion of non-indifference and the idea that problems and issues often very, very deeply embedded in other societies require an international response, in which Brazil has been willing to be active whether that is crises in Bolivia or problematic relations between Colombia and Venezuela is quite a significant movement. It is different from forcible coercive intervention, but it is still quite an important movement in terms of understanding where the country has come from and where it might go. Even in the Libya case, not just in relation to Brazil but more generally, there were differences between the two resolutions. The first resolution actually brings emerging powers along, mentioning the Responsibility to Protect and mentioning the ICC, 7 which, for a country like India, is a big thing to happen. It is different and distinct from the second resolution, which was seen to be far too open-ended in terms of the scope it might give to intervention. Seen in that way, it is not a black and white story in which Brazil and other emerging countries are locked into this absolutist non-intervention position. There has been movement. The question is about the terms of that movement and the terms of intervention. That brings us back to the other question, If you were a more permanent member and achieved your goal, would that be sufficient to shift your policy further and more dramatically still? I would be quite hesitant in suggesting that there is anything like an automatic relationship between those two things. Q109 Sir Menzies Campbell: One of the forms of permanent membership that is on the table is permanent membership without a veto. Would Brazil regard that as being second-rate? When you answer 7 International Chamber of Commerce. that, perhaps you could refer back to your analysis of the kind of foreign policy that Brazil might be expected to follow. It seems to me that you could follow that non-interventionist policy let me call it that for shorthand reasons perfectly well without a veto. But how would Brazil regard that kind of division of responsibility within the Security Council for permanent members? Dr Riethof: I have to say that I am not entirely sure what Brazil s view is on that issue. Professor Hurrell: You would have to inquire more directly of those who are following the specifics of the negotiations. I guess that it would depend on what the overall package of a reform looked like. For example, if it was a large reform with a large council, would there still be a hierarchy from which Brazil would feel excluded? It is quite difficult to answer the specific non-veto question without knowing what the package would be, which that non-veto question would be a part of. Q110 Sir Menzies Campbell: Perhaps that s something that should be explored on the Committee s visit. May I ask you a few questions about the BRIC countries? First of all, it is not a formal grouping. Nevertheless, do you think that that informal grouping has any influence upon Brazilian foreign policy? Does Brazil look round at the other BRIC countries and try to be equivalent to them in its approach? Professor Hurrell: I am not sure about looking round at them. In a sense, the BRICs grouping was invented out of the whole notion of emerging markets, by Goldman Sachs and so on. There are any number of people who will tell you why the BRICs make no sense as a grouping. For example, what is Russia doing in there, as it is a declining power? And so on. There are all the differences and contradictions between the foreign policies and world views of these countries. All of those things are true and yet the extraordinary thing about BRICs is that it has acquired a kind of diplomatic reality. There are BRICs summits and I understand, as an academic outsider, that in a number of other groupings, such as the G20, the BRICs framework for co-ordinating and discussing policy seems to have taken on a certain kind of reality. So my view is that, yes, all of the obvious problems are there and BRICs are not going to be the definitive alliance that will change and structure the world, but we are not really in the business of very clear alliances. We are in a much more fluid and flexible situation and lots of new groupings are emerging. Their exact status is unclear, but of those groupings, it is quite plausible that the BRICs grouping has quite a lot of life left in it yet, particularly since we are in the process of beginning to rethink some of the institutional structures of global governance. My bottom line is that, despite everything, there is slightly more there with BRICs than one might have expected. Q111 Sir Menzies Campbell: Would Brazil think that it enjoyed considerable influence within that grouping? Professor Hurrell: If you look at all the indices, many articles in the Financial Times and elsewhere were

82 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 not be there, it is in such a different rank in terms of power. We have China, and India, even, which are in material power terms, many times more important. Q112 Sir Menzies Campbell: All nuclear powers, in the case of Russia, China and India. All possessing nuclear weapons. Professor Hurrell: Yes, exactly. So what is Brazil doing there? Well, we can have that debate and we might argue that other kinds of power resources are very important. Brazil has a number of assets that give it an important place in terms of how we think about global governance in the environment and so on but from Brazil s side, as we have already said, the dependence, the centrality of a kind of activist, multilateral, small-group diplomacy is very clear. This is the road that says: if you can t build it on the back of your own national power, you have to build it on the back of what one former Brazilian diplomat called diplomatic GNP and the BRICs are clearly part of what you might call diplomatic GNP. Q113 Sir Menzies Campbell: That is the basis for your illustration of their role at the G20? Professor Hurrell: Yes. Q114 Mr Roy: Taking you on to the issue of aid to Africa, should the United Kingdom Government be concerned about the level of aid that Brazil now puts into Africa and its growing stature there? Dr Riethof: Aid from Brazil to Africa is growing fast, but still, on a global level, overall Brazilian government expenditure is a relatively minor amount of money. However, there is very clearly growing aid and also growing investment in trade with Africa. For Brazil, this is partly to promote its economic interests in the region, so Brazil is a major exporter of manufactured goods to Africa and Africa exports commodities and natural resources to Brazil. The African relationship that developed under President Lula was focused partly on developing those interests, developing investments from Brazilian companies, and also on developing diplomatic relations, developing support for the Brazilian role globally and for Brazilian permanent membership of the Security Council. Whether this is something to be concerned about is a question of scale, because the Brazilian effort there, as well as being small, focuses on aid, and very much on social programmes and agricultural development. It also focuses on the Portuguesespeaking countries, the traditional partners of Brazil in West Africa. I would say that it is relatively minor, but a major part of Brazilian foreign policy in developing its international, global role. Q115 Mr Roy: But is it a way of buying support and influence? Also, based on that, is there a danger over its relationship with China, which seems to be doing a very similar type of exercise in that area of the world? Is there a danger that those relationships could be affected? Professor Hurrell: I don t see that. It seems to me a very different kind of case from the concerns that emerge over China, in terms of strategic competition or undermining notions of what aid is about. I have not followed and participated at all in the official side of UK-Brazilian relations, but it has always seemed to me that the relationship over policies towards Africa is actually I was going to say easy, but that is not quite the right word a good and productive one, because the policies of the two countries run in broad parallel. Yes, Brazil has a particular focus on the nature of its social programmes. It makes claims about its own experience, and there are different places in terms of Portuguese Africa, but in broad terms it seems to me that when people are putting together agendas for UK-Brazil, action and aid in Africa is an area where there are clearly many things that could be done together on the ground, and perhaps also in thinking about what the aid regime more generally will look like in years to come. I see it as very different in character from somewhere like China, but perhaps I have missed something. Dr Riethof: It may be a small point, but it seems from the evidence that Brazilian aid to Africa tends to be much less controversial than Chinese investment and aid in Africa. Q116 Andrew Rosindell: In terms of relations between Britain and Brazil, and in terms of Brazilian relations with its near neighbours, we have the issue of the Falkland Islands. What is the likelihood of Brazil helping to heal the rift between Argentina and Britain, and perhaps acting as a mediator? Is there a possibility of that? Secondly, if that is not a possibility, are we reading the signs correctly that perhaps the hostility towards Britain from Brazil is growing? We have seen one or two recent events that have indicated that. Is there a chance that Brazil will help, or continue to support Argentina s claims? Dr Riethof: To start with the second question, I think we need to see the Brazilian action in January in a regional context. It was agreed in November 2010 at a Union of South American Nations summit that certain actions would be taken regionally, and that has been promoted by Argentina for the last few years in a regional context. That also fits with Brazil s agenda of stressing national sovereignty and national selfdetermination. But I don t necessarily think Brazil is actually moving towards stronger support for Argentina s claim over the Falkland Islands. Whether Brazil will play a mediating role in the Falklands is an interesting question to explore. Of course, Brazil has economic interests in the region, and it has economic interests in Argentina, so that might be a way to mediate. Q117 Andrew Rosindell: Do you feel that Brazil s position is purely because it is part of that region of the world, and it feels that it had better stick with its neighbours and back up Argentina, or does it genuinely support Argentina s claim over the Falklands? Dr Riethof: I hesitate to say whether it does or doesn t support Argentina s claim, but I think the incident in January needs to be seen in the context of the Brazilian President visiting Argentina for trade

83 Foreign Affairs Committee: Evidence Ev May 2011 Professor Andrew Hurrell and Dr Marieke Riethof relations, so there is also an element of political context that needs to be considered. Professor Hurrell: I would underscore the regional picture, and how it has changed. We mentioned a little while ago the background of Argentina-Brazilian rivalry. Relations were bad in the 1970s. They began to improve in the late 70s, and improved substantially between Brazil and Argentina through the 1980s. When we look at a map, we think that Brazil is and always has been part of Latin America, but historically that is not really accurate. Brazil has seen itself as different and distinctive from the rest of Latin America. The first visit by a Brazilian President to Colombia was not until Brazil has been very separate, so the move to the region, and the importance of the region in Brazilian foreign policy, is something we can trace. 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. Q118 Chair: To go back to the USA, what is Brazil s relationship like with the States and do you think we will ever be in a position where we in the UK have to choose between Brazil and the USA? Professor Hurrell: I doubt it. Chair: Good. Professor Hurrell: Many people look at the broad history and think of the United States as being so obviously the completely dominant country over its backyard, and that everything that any country in South America does is exclusively and heavily focused on the United States. What is interesting about Brazil and the United States is that as we move into the post Second World War period, the periods of very close relations have been few and far between. The dominant picture has been of relative distance. What is interesting about the more recent years is that that has not actually changed. As the United States has become very preoccupied, post 9/11, with other parts of the world, relations, say between the Lula Government and the Bush Administration, were cordial, but there was not a lot of substance. There are clear signs from the Brazilian government that they would like to have more cordial and more open relations with the United States. There are signs, as part of the United States coming to terms with strategic, emerging partners, of a new focus on Brazil. Yet what is quite striking is the difficulty of giving much meat and substance to that agenda. It is a crude comparison, but if you compare the nature of, say, the US-Indian relationship, there is nothing comparable and nor is there likely to be. Of course the United States is a major player for Brazil, but Brazil, as the discourse and the rhetoric has it, sees itself as a global player and only sees the United States as one part in the bigger range of its relationships. On that basis, it is hard to imagine a situation where that kind of question would emerge. Dr Riethof: Although there have been quite a few disputes and disagreements over the last few years between Brazil and the US in political fields and also in the economic area, relations are generally cooperative and they should be seen within the general foreign policy objectives of Brazil, including the Brazilian aim to keep support among the great powers the members of the Security Council for its bid for a permanent seat. It is quite a complex relationship; it is not a formal alliance, and I think there will always be certain areas of disagreement. One of the more prominent ones is the area of trade relations. Q119 Chair: We have completed our questions. Have we asked you all the right questions? Is there any point you would like to summarise or are we there? Professor Hurrell: We have covered the UN and we have talked about nuclear. I would always include climate change and the environment as well because if we are thinking about why Brazil matters Chair: We covered that with other witnesses. Professor Hurrell: I am sure you have, but on the global issue side that is really important. Obviously, I presume you are pursuing the domestic side of the question of sustainability, or at least the challenges, on the domestic side, as discussed in the earlier session this afternoon. This is a necessary counterpart to Brazil being able to do the sort of things we have been talking about on the international side. Chair: Thank you both very much indeed. It is really appreciated. We are going off there in three or four weeks time and it is very helpful to have this sort of briefing before we go.

84 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 this hearing of the Foreign Affairs Committee. It s our third and final session for our report on UK-Brazil relations. Our witness is the Minister of State, Jeremy Browne, who is responsible for this area. He is accompanied by Angus Lapsley, Director for the Americas at the FCO, and Vivien Life, Acting Director of the Prosperity Directorate. I welcome you all. I am sorry that you got caught in the rain on the way here. Minister, you are now homing in on the Foreign Secretary s record for attendance before us. Mr Browne: It is what we all aspire to. Q121 Chair: He is still in the lead for appearances, but you are now firmly in second place among your colleagues. I welcome you again. It is only three or four weeks since you were last here, when you were talking about the human rights report. The Foreign Secretary told us that he thought that by 2015 the bilateral relationship between the UK and Brazil would be visibly strengthened. What progress has been made on that over the last year, and how do you see it going over the next few years up to 2015? Mr Browne: First, Chairman, thank you for giving me an opportunity to discuss this issue. That question encapsulates probably the whole hour and a half that we will have together, so I will try to give a reasonably succinct answer and then look to expand on it in answer to subsequent questions. Let me start with a quick scene-setter. If you ranked the continents of the world in a hierarchy based on the amount of attention afforded to them by Britain I don t just mean the British Government; I mean media, Parliament, dare I say it, continents that British people have travelled to etc. Latin America would be bottom of the league table. That continent has suffered from benign neglect, and I am not making a particularly party political point. It is noticeable, if one attends Foreign Office questions in the House of Commons, how few questions cover subjects to do with Latin America, so it is a wider point. We are keen to address that. That doesn t mean that I think that Latin America will suddenly be catapulted to the top of the league table, but I do think we have some catching up to do. Brazil is the market leader. Its GDP is more than half the total GDP of South America not Latin America, because Mexico is in second place. We have all kinds of shared interests. Somebody put it to me that if we were seeking to invent a world superpower that was new on the stage, we might well look to invent something pretty similar to Brazil, by which I mean our interests are not just economic but cultural, values based, educational and policy based. We have a lot of shared interests and we wish to increase our engagement across the board, whether that is by having a greater number of people working in Brazil, as we will do, by having more visits from high-level politicians for example, the Deputy Prime Minister is visiting Brazil the week after next or through House of Commons engagement. I m delighted that you are part of this process yourselves. It may also be done through sporting links. I hope to have more Brazilians studying at British universities and so on and so forth. I think that by 2015 we will see more signs that Britain is more engaged with Brazil and other countries in Latin America as well. Q122 Chair: How will you measure performance? Mr Browne: Some areas lend themselves to measurement more easily than others. There is a target, which you will be aware of, seeking to increase the value of British exports to Brazil from 2 billion annually to 4 billion annually. Of course, that is not solely the gift of the British Government; it relies on British businesses producing goods and services that Brazilians wish to buy. But it is a reasonable target, and that is why our UKTI and Foreign Office teams are geared up to try to achieve those targets. You could measure it, I suppose, in terms of numerical assessments such as the number of Brazilians studying at British universities, but in other areas, it may be harder to measure so definitively as that. It may just be a wider sense that Britain has not neglected the relationship. When I was in Brazil about three weeks ago, it was quite striking that the general view of Brazilian opinion formers admittedly, the type of people I would be likely to meet 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. Bluntly put, 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. Brazil is well disposed towards us, but it does not give us automatic bonus points that are not earned in terms of our relationship

85 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 to take it. Chair: No free lunches. Mr Browne: Well, you may discover otherwise, but I understand your point. Q123 Chair: The National Security Council has produced a strategy paper on Brazil, but it has not been made public. Is it possible to share with us the thrust of the paper? Will a version of it be made available to us, albeit on a confidential basis? Mr Browne: I am not aware of the basis on which those papers are produced and distributed; that is not a decision that I make. There may be some information contained within the paper that is of a sensitive nature, but most of the areas that were considered were not security based but about economic prosperity, trade, environmental engagement, educational links and so on. I wouldn t have thought that it would be necessary to withhold most of that material, but I am not responsible for the Secretariat of the National Security Council. Q124 Chair: Will you be able to look at whether or not we could be briefed on its content? Mr Browne: It may be that Angus, who leads on the Americas for us in the Foreign Office, will wish to answer that. To spare you leafing through it all, the best solution might be if you have a meeting directly with him and discuss some of these issues in greater detail. Angus Lapsley: I am certainly open to that, but there may be a short cut which might help you. The network in Brazil, like all Foreign Office diplomatic networks, has what is called a country business plan, which is very closely based on the strategy adopted by the NSC. If that is not on the embassy website, it will be shortly and we can certainly share a copy of that with you. It basically sets out what we in London are asking the network in Brazil to deliver. It is very much based on that strategy and will give you all you need, bar the most sensitive bits which, as the Minister said, are not in the public domain. Chair: Thank you; that would be helpful. Q125 Rory Stewart: We talk a lot about developing a strategic relationship with Brazil. What does that mean that is any different from the kind of relationship we might have with India, South Africa or any other big regional power? What is the difference between saying, This is a regional power; it matters and Britain has a relationship with it, and saying that we want a strategic relationship? Mr Browne: That is a good question. You would be hard pressed to find a Foreign Office Minister who says that they do not want to have a good relationship with countries such as India and South Africa. I tend to find, given the nature of a lot of papers that are produced in the Foreign Office, that we seek to have a good relationship with pretty much everybody. What would make Brazil different, however, is that there is a high degree of compatibility between our political approach and that of the Brazilians. For example, I was not there myself but I was told by the Secretary of State for Energy and Climate Change that in Cancun he worked in greater harmony and harness with his Brazilian opposite number than with any other climate change or environment Minister present at the talks. I was in Brazil and had a meeting with Ministers and parliamentarians many of whom you may well meet yourself in Brasília to talk about human rights issues. It is quite striking that although a bit of progress needs to be made in Brazil in areas such as prison conditions or domestic violence, for example, 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. In commercial and business terms, Brazil is the seventh largest economy in the world, and it will shortly be the fifth largest that depends slightly on how you measure such things, but it will overtake us and the French reasonably soon. Brazil is still only the 83rd largest in GDP per capita, before people get too carried away with the quality of living of the average Brazilian, but in economic terms in terms of its dollars GDP per capita, which I think is $8,000 or $9,000 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. So, 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. Q126 Rory Stewart: In terms of getting, bluntly, into a position where we could reasonably compete with France or Germany in Brazil, are you sure that we have the right kind of embassy and the right approach? We have two extensive speakers of Portuguese in the embassy, and perhaps four or five operational speakers among the UK-based staff. We do the Queen s birthday party at lunch time, and in football strips last year. We are not really penetrating the Brazilian elite in the way that the French or German embassies have over the last 20 or 30 years, partly because we have tended to focus on climate change. Are you proposing to do anything that would allow you to develop the political context for the Brazilian elite, where our European competitors are well ahead of us and have been consistently? Mr Browne: You are right to make the observations about Germany and Italy. Rory Stewart: And France. Mr Browne: And France. It was striking to me, although it may be old news to everyone else in the room, how many Brazilians have German, Italian, or, to a degree, French ancestry, and therefore perhaps have a disposition towards having connections with and doing business with those countries in Europe. I have no personal objection to us making a virtue of our shared interest in football, but I take your underlying point, which is 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.

86 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 value the Foreign Office puts on what we now call diplomatic excellence, by which we mean deep understanding of a country s culture, history, political system, architecture and language, compared with having a campaign-mode diplomacy, if you like. It is true to say that this Government has shifted the emphasis away from what I described as campaignmode diplomacy important though some campaigns are towards trying to make sure that we get the core basics right, in terms of our diplomatic offering. That completely applies in countries around the world where the pace of change is fastest. I would like us to have more people in the Foreign Office learning Mandarin, or having a really sophisticated understanding of the politics of all the different parts of India. It is not just a Brazil issue. What does the Foreign Office exist to do? It is to have a more sophisticated and deeper understanding of all the different countries in the world than would otherwise exist if the Foreign Office were not there. I am entirely sympathetic to your question. I hope that we are going in that direction. I would not underestimate the calibre of the people that we have there we have many good people but I would be interested to hear what the Committee thinks about ways that we can make further improvements in the years ahead. Q127 Rory Stewart: Is there any opportunity to build up a more developed cadre of specialists, who could specialise in the Portuguese language, or in Latin America, and who could really organise their careers around that kind of understanding and those relationships? Mr Browne: Let me comment briefly, then come to Angus or Vivien. There is a wider point, which is that if you are an ambitious young person joining the Foreign Office, how do you make it to the top, and what do you even regard as the top? Is your ambition to become the Ambassador in Washington? Most people would probably regard that as the most senior job, but it could be the United Nations or Paris whatever it might be. I would be keen to see a greater number of people who could see their career advancing through greater knowledge of Latin America. That reflects the wider observation that I made right at the beginning, which was when I said that if you rank the continents of the world by how they are perceived in Britain, you would probably put Latin America at the bottom. It would be odd if the Foreign Office was completely removed from that, and it is possibly the case that some people joining the Foreign Office think that they will see more high-profile work in the Middle East or elsewhere in Europe, for example, than they might see in Latin America. So there is an internal perception issue that we need to address within Government. What makes a difference of course I will put this in terms that may slightly flatter the Committee are things like the Foreign Affairs Committee going to Latin America or the Minister needing to be prepared for a session in front of the Committee on a Latin American country. All of that creates a sense of interest and a sense of people being in a part of the Department where their skills are valued. As I have only been there for a year, however, I would defer to those who have been there longer. Angus Lapsley: Six months longer than me. I have three brief points. On languages, it may be a little bit better than you perhaps think. The distinction between operational and extensive is often to do with whether you have come back home to do the exams or not. In practice, we would expect the people in Brasília and São Paulo and elsewhere to be working at an extensive level, and I am pretty confident that our front-line staff are doing just that. Secondly, 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 SMS-3 or director-general level ambassadorships. It really is one of the most highly sought after jobs. Thirdly, you are right that a lot of our effort has been on climate change. That is where a lot of the staff have been, but we are broadening that out. I was not able to talk about this when I met the Committee informally, but the Foreign Secretary has now made his announcements about network shift, and we are reinforcing our network in Brazil. We are doing targeted reinforcements such as, for example, putting somebody into Rio to work specifically on sports issues in the run up to the World Cup and the Olympics, where there are huge commercial opportunities. We are also putting extra people in to do basic political economy work, so that we really understand what is happening in Brazil and provide people in our embassy that the whole of Whitehall can plug into and get really good high-quality advice on what is happening in the country. To that extent, I agree with you, and we are moving in the direction of a reinforced network in Brazil. Q128 Sir Menzies Campbell: I am stimulated by the discussion about strategic, and in a moment or two I want to ask some more questions about the global role that Brazil might play. But is not a strategic relationship one where there is a sense of common purpose not necessarily in every aspect of the relationship which also implies a degree of partnership? If I am right about that, are you able to identify areas in which you think apart from the climate area that you referred to there is the opportunity for common purpose and partnership? Mr Browne: Yes. I take your point, which is that we want to have a relationship where we feel that the two countries represent something more than the sum of their parts and can speak together with an amplified voice in international arenas. If you take the example that you may have in the back of your mind about Brazil abstaining on the vote on Libya in the United Nations, that would be an example of where we are not, at this stage, able to reach that conclusion. Having said that, there are quite a lot of areas where we are fairly in sync. Many of our business and commercial interests overlap. Our sporting and cultural interests overlap. We are deficient in terms of our educational exchanges, but not because there is an antipathy towards educational exchanges. It has just suffered to a degree from neglect and insufficient

87 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 just come back from China, which I also cover, and my conversation about human rights in Brazil takes a rather different form from my conversation about human rights in China. There is a lot of synergy in terms of political and values-based agendas, which means that, by and large, we are in the same place as Brazil on more issues than we are not. Q129 Sir Menzies Campbell: That leads logically on to the question of what role you would expect Brazil to play as it emerges, given that the analysis tends to suggest that the more economically powerful a country becomes, the more politically ambitious it becomes. We have China and India as very eloquent examples of that. What role does Her Majesty s Government expect Brazil to play? Mr Browne: Brazil itself aspires to play a global role rather than a continental role. It sees itself increasingly in those terms. The only observation I would make about all of the three countries that you have mentioned is that Britain, France and the United States have a lot of experience in playing global roles. Q130 Sir Menzies Campbell: Some of them colonial. Mr Browne: Drawing on all kinds of sources. The point I am making is that that comes with a degree of expertise and self-confidence in institutions like the United Nations, which is not necessarily acquired overnight. We welcome many of the countries having a greater role. We support Brazilian and Indian permanent membership of the UN Security Council, but that comes with obligations. It is not necessarily as straightforward or as attractive as it may appear on first inspection. All those countries are feeling their way into greater global roles. We are keen for them to do so. It is a gap that the UN Security Council does not have a permanent Latin American member. It would be strengthened by having permanent representation from that part of the world, although that would, of course, give the country that was representing that broader interest, in this case Brazil, a degree of obligation or responsibility that it had not previously exercised. Q131 Sir Menzies Campbell: If we can deal with the UN question. As you know, the debate about United Nations reform has taken place for a long time, usually focused entirely on membership of the Security Council, although there is a wider argument about reform generally, including elsewhere in the United Nations architecture. For example, one of the ideas that has been floated is, Yes, there can be permanent membership for countries like Brazil and India, but there will be no extension of the veto. Is that an argument or discussion that you have had with those interests in Brazil who are anxious to promote the case for permanent membership? Mr Browne: The straight answer to your question is no, I have not discussed it in those terms. Britain has a long-standing position, which has not been altered by a new Government coming into office, to expand the permanent membership to include Germany, Japan, India, Brazil and African representation. Whether you could have a Security Council, with 10 countries exercising a veto, which was still able to make decisions on very much, is a moot point. One potential area for compromise would be permanent membership without a veto. The Brazilians are appreciative of us supporting their position. The only sensitivity is that the Mexicans are less enthusiastic about Brazilian permanent membership than the Brazilians are, as you might imagine. It is a good basis for us to argue the Brazilian case. The default mechanism in all these institutions is to stick with what you have got, unless there is a momentum to change. That is always difficult to effect and there are interests that prevent that from happening. I have not discussed it in those terms with them, but the Brazilians certainly aspire to exercise a bigger role on the world stage, and we are instinctively sympathetic to that objective. Q132 Sir Menzies Campbell: You mentioned the correlation between rights and responsibilities. How big a policy change do you think it was for Brazil to vote in favour of a Special Rapporteur on Human Rights for Iran? Mr Browne: I think it is a significant policy change and it has been interpreted as such, because there is quite an abstentionist mindset in some aspects of Brazilian foreign policy and, if I am being more general, in some aspects of Latin American foreign policy as a whole, in so much as it can be seen as a collective body of thinking. I did not previously get a sense that there was a desire to frustrate the ambitions of countries such as Britain, but there may not have been a great enthusiasm for supporting those ambitions, so that is quite a significant shift, because it suggests that the Brazilians are in a position that we would like them to be in, and keen to take a responsible leadership position on a country that is in a completely different part of the world from them. In other words, they are thinking globally rather than on a regional basis. Given that we broadly share the same outlook as the Brazilians, we welcome their wider interest. Q133 Sir Menzies Campbell: But measured against as you said in your introduction the disappointment over their vote in relation to the resolution. Mr Browne: Yes, it was an interesting vote. The five abstainers were rather significant countries, but of course in some cases the assessment was that an abstention was not a bad result, because the alternative was a vote in the opposite direction from us. I would not necessarily put Brazil in that category. I think that Brazil is a country that we would think of as abstaining, but inclining towards the British side of the debate rather than the alternative side. But it is quite striking that, for example, the Colombians voted with us on that decisive resolution and did so with great clarity and lack of fuss, if I can put it in those terms. They were very clear-minded about the way they cast their vote, and that was not the case with the Brazilians, so different countries are in different places.

88 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 in every regard in Latin America, but they are not necessarily the country that we would see as having the quickest or how can I put it? greatest compatibility with us on all foreign policy issues in Latin America. But they are in a position with which we are comfortable, and with which they are comfortable as well. We enjoy working with the Brazilians. We see it as a partnership that has strong potential to develop further in a good direction. Q134 Sir Menzies Campbell: They are putting a lot of resources into their foreign service. It has also been suggested that, were they to become a global power, whatever that may mean, they would want to spend rather more money on defence. Do you attach any significance either to the first of these, or the second the ambition? Mr Browne: Certainly to the former. The Brazilians are seeing themselves as having a greater global role, and one manifestation of that is Brazilian embassies and consulates opening up in different parts of the world, with very high calibre staff and larger numbers of staff. I strongly support the Government s deficit reduction measures, but as a Foreign Office Minister I am quite struck by how little we spend on global diplomacy. Q135 Sir Menzies Campbell: You will find a ready ear for that. Mr Browne: I think the French, who have almost exactly the same population and GDP as us, spend double what we spend. That is always seen as a costfree decision by us, or at least some people may think it is cost-free. We have extremely able people and so it does not always show. But it is a more competitive global environment. Countries such as Brazil, but also other major countries that have been mentioned already China being a perfect case in point are seeking to paint on a broader canvas, and we need to be mindful of the potential consequences of that, although, in the case of Brazil, that may well mean that we have a willing ally in more countries than we previously did, so it may be an entirely positive development. In terms of defence, Brazil has not previously been regarded as particularly expansionist, and compared with other developing superpowers that is still the case, but it may well see its role increasing in the years ahead. Q136 Sir Menzies Campbell: It might be a market for our redundant frigates. Angus Lapsley: Two points: there are some parts of the world in which the Brazilians have stepped up their diplomatic representation, in which they represent a new partner for us, particularly in West Africa and the Caribbean. That is very helpful, because those are parts of the world in which we have long wanted other people to get involved and it is useful to have another interested partner. The Brazilians are becoming an increasingly important development player, because they are prepared to put money in. There is a growing ambition on defence in Brazil. That is essentially focused on its own regional security and, in particular, its maritime security, which offers considerable potential for co-operation, with the Royal Navy for example. It is also focused on peacekeeping. Brazil already plays a significant role in Haiti, where it leads the international peacekeeping operation. We would like Brazil s international role in peacekeeping to continue growing and we are offering co-operation and partnership to help with that. Q137 Sir John Stanley: Minister, I have a couple of questions, both of which are on the international front, but are in two different areas. First, the international Arms Trade Treaty is going to start and it reaches a critical negotiating phase next year. I have received advice from officials in your Department that Brazil is adopting a less than positive attitude towards the Arms Trade Treaty. In particular, it is seeking to remove or to exclude the all-important reporting obligations on countries that become signatories and ratifiers of the treaty relating to the arms export licences that they approve, which is, of course, absolutely fundamental to the treaty. What steps are the British Government taking to try to get Brazil to adopt a more positive and constructive attitude towards the Arms Trade Treaty? Mr Browne: I am searching around because I do not have an off-the-peg answer for you. Unless anyone else wishes to answer, I would say that perhaps that answers the question in its own way. I am not aware of a situation that is as concerning as the one you imply, Sir John. We have a co-operative relationship with Brazil and I do not know of anything to suggest that it is seeking to be obstructionist in that way. All I can do is undertake to find out whether there is further work to be done. Q138 Sir John Stanley: You have seen the question that I have put, so perhaps you would like to follow it up with a response in writing when you have had time to make some further inquiries. Mr Browne: Absolutely. I apologise, but perhaps the reason why I am not alert to those concerns is because I have not heard Brazil being raised in that context. Mostly, when Brazil is discussed in defence and arms export terms it is seen as Sir Ming has alluded to as being a benign force and a potential market for some of our sales, rather than as being on the other end of the spectrum and frustrating our values. We need to check whether there is an area there that we should be concerned about. I will certainly let you know if that requires further work. 1 Q139 Sir John Stanley: Thank you. My second question relates to human rights. You referred to your conversations on human rights in Brazil. The advice I have from the House of Commons Library is that Brazil has neither signed nor ratified the amendment to article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination; she has neither signed nor ratified the optional protocol to the International Covenant on Economic, Social and Cultural Rights; she has neither signed nor 1 See Ev 67.

89 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 Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; and she has not signed or ratified the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families. Minister, I would not expect you to respond immediately to that, but could I ask you to respond in writing about whether that is indeed the position of the Brazilian government, and if so, whether the British Government is seeking to amend the Brazilian position? As you will appreciate, because of the way in which the Committee operates, we are not able to take direct evidential material when we go overseas, so it would be very helpful if you could fill in for us what you understand the Brazilian justifications are for these non-signatories and nonratifications, and whether the British Government is trying to change the Brazilian position. Mr Browne: May I thank you, Sir John, for not expecting a detailed answer on each of those individual points? Of course, I will let you know what our detailed response is in writing. 2 The only slightly wider observation that I would quickly make now is that because a country has not signed a particular resolution, it does not necessarily mean that it does not have an enlightened policy in that area. 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. As I said earlier, that has some wider benefits, as it does with international development, in terms of there being a new world player that may be listened to more sympathetically than Britain sometimes is, and which may be able to try and lead the debate in other parts of the world, where our values are not always so readily shared by other countries. I felt that the Brazilians were in quite a good place on those issues, and they acknowledged that where they were not, they wanted to do better. However, you have given me more cause for concern, so I will reply to the detailed questions, as you asked. Q140 Mr Watts: Minister, you showed some concern about the level of resources that you have globally. Does that reflect itself in Brazil? If so, what problems do you create by not having the resources that perhaps some other embassies have? Mr Browne: I think Britain borrows more money every weekend than it spends annually on global diplomacy that is the context in which I was making those observations. Some government departments have rounding errors bigger than the Foreign Office 2 See Ev 67. budget, yet less than 1% of the world s population live in Britain. All the other departments, apart from DFID and Defence, have to deal with 1% and we get the remaining 99% to keep an eye on. As a result, we have to make economies and efficiencies I do not actually mean just this Government. I think that this is, to an extent, over a period of time, a process that means there are areas that we could look to do more in than we currently do. Having said all of that, let me make two quick observations. First, some of those changes and efficiencies have strengthened aspects of our work. Some of our locally engaged staff cost us less to employ, but give us a different understanding of the host country, which can be beneficial. Secondly, within the Government, under the direction of the Foreign Secretary, we have consciously looked to try to adapt our Foreign Office network to take account of the changes that have taken place in the world. The tendency, or the risk, is to bring the Foreign Office network up to date with now, then leave it for 10 years until we have the next review. Then, it goes more and more out of date, until it is 10 years out of date, and you bring it up to present again, then allow it slowly to go 10 years out of date again. We are trying to get ahead now and anticipate future changes in the world and that is why we are shifting more of our fairly limited resources into China, India and Brazil. It does not take a genius to work out that those countries are increasing in importance, but we are trying to make sure that increased importance and anticipation of an even greater increase in the future are reflected in the way that we deploy resources. Brazil is part of that equation. Q141 Mr Watts: Given that Brazil is one of the main areas that the Government has identified financially where they want to be and where they want to strengthen, how many more posts have we in Brazil at the moment? How does that compare with some of the other missions? We talk about the French and the Germans having a start on us as far as competition is concerned. Have we anywhere near the resources that we need to actually compete with them? Angus Lapsley: As the regional director responsible for this part of the world, I would obviously always like a bit more to play with. But, when I look at our Brazilian network and its impact in country, it compares very well to other European countries. That is partly for the reasons to which the Minister referred. We deliver quite a lot through highly talented local staff, whereas the French and German missions would probably bring people over who, as Mr Stewart referred to, might not necessarily speak Portuguese and might spend a lot of time at receptions, but not much time out there doing stuff. We feel that the network has a high impact, but we are increasing it. To answer your specific question, 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

90 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 always like a little bit more. Mr Browne: May I add a brief supplementary? Consciously, when I visit large countries, I try to get away from just visiting capitals. The Foreign Secretary and the Prime Minister are likely to go the principal city and the capital city if those are two different places. I went to a city in the south of Brazil called Porto Alegre. We have one or maybe two locally deployed staff there, but it is not a full-blown British consulate. I was there for only two thirds of a day, and they organised an excellent programme. The local knowledge of the person who principally organised it was extremely valuable. As far as I could work out, she knew everybody who there was to know in that city with 1.5 million people, and in which Britain has some significant trade and cultural interest. It is not necessarily the case that the more expensive the member of the staff and the more British they are, the more effective they are on behalf of Britain. That anecdotal example showed that we were able to get very good value for money and a good presence in that city. Q142 Rory Stewart: I have a couple of thoughts. In terms of strengthening your strategic relationship, on defence when was the last time the Chief of the Defence Staff visited Brazil? On Brazilian development in Africa, why is DFID not putting more money into working more closely with Brazil in Africa? Mr Browne: Pass on question one. Gerald Howarth, Defence Minister, has visited Brazil in the past year since the Government was formed. We have a defence relationship, but I do not know when the Chief of the Defence Staff last visited. There is only one Chief of the Defence Staff, and there are a lot of countries in the world in which Britain has defence interests, so the Chief of Defence Staff needs a bit of time to think about defence as well as travelling to countries in the world where, I am sure, there is a huge demand for him to be, were he able to arrive. We want to have a keen relationship with them and that is indicated by one of our Defence Ministers visiting reasonably recently. Q143 Rory Stewart: DFID and Africa? Mr Browne: When I was in Brazil three or four weeks ago, I attended a reception that may be illustrative of this point. There was a DFID programme to help Kenya, but a lot of the training with the Kenyans was being done in partnership with the Brazilians. That was seen as a potentially productive way of achieving the objective. The reception, slightly improbably, was for lots of Kenyans who were in Brasília. The programme was, from memory, at least in part funded by DFID, so there are opportunities. I have never been to the north-east of Brazil, but I am told that if one goes there, there is a greater sort of empathy with Africa, just because of the geographic proximity. That is an area that I imagine DFID would like to explore. Angus Lapsley: I do not know when the CDS last went, but certainly the First Sea Lord was there last year. We have annual high-level staff talks between the militaries as part of the defence treaty that was concluded last year. DFID pulled out of Latin America some time ago, as part of its focus on the poorest countries in the world, but the one place in Latin America where it still keeps staff I cannot remember whether it is two or three is Brasília, precisely to work on this question of Brazil as a partner, principally in Africa, but not just in Africa. Brazil is an increasingly effective voice on a whole range of global development issues. Q144 Mike Gapes: Can I take you back to Brazil s foreign policy and relationship with the UN system? President Dilma Rousseff was elected, or took office, at the beginning of January, and since then we have had, as was already mentioned, the resolutions on Libya. I want to explore that a bit further, and go a bit further than where you were in the previous answer. One of the witnesses in a previous session said that Brazil s abstention on Security Council resolution 1973 should not be interpreted as Brazil remaining firmly in a non-interventionist position. I want to know where you assess Brazil to be. Is Brazil fully signed up to the responsibility to protect concept, or is it some way away from that? Why did it take the position that it did abstaining on Security Council resolution 1973, but supporting Security Council resolution 1970? Is that because it is uncomfortable with the idea of the use of force? Mr Browne: That is a very good question. I cannot give you a fly-on-the-wall account, because I am not the Minister responsible for the United Nations. I am responsible for Brazil, and as a result I was not party to the details of those negotiations in New York. Rather than just leave it there, let me engage a bit more widely on your point, which is that Brazil is not fully persuaded. If it was, it would not have abstained. 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. Of the remaining countries, there are some that are more enthusiastically and unequivocally in the position that we are in on these matters. I cited Colombia, because it had an opportunity to exercise a vote. Mexico would be in that position as well. There are others that hang back, but are not hostile to our analysis of the situation. That is where we are. I look at Latin America as a whole and regard it as an extraordinary success story. It is a continent that 25 or 30 years ago only a generation ago had a large number of countries with basket-case economies run by autocrats of one type or another. It now largely has economies that are growing strongly, with deficits considerably lower than our own, and democratically elected leaders. I suppose my point is that the 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. By and large, with one or two exceptions, they have all moved in that direction together. Q145 Mike Gapes: Can I take you back, though? The key point that I am trying to make is that Brazil

91 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 nonintervention in other countries internal affairs. That was explicitly stated on a number of occasions in the past under President Lula. I am interested to know whether Brazil is now at least prepared to engage with the idea of the responsibility to protect not rhetorically, but actually in practice. For example, is there any indication that Brazil is prepared to help in any way with the implementation or enforcement of resolution 1973? Mr Browne: The honest answer is that Brazil is not fully in the place that you describe. If it were, it would have behaved accordingly. I have had this conversation not with the Brazilians, but as a private conversation, so I shall leave the person nameless with someone from another country in Latin America. The conversation went along the lines of, We are in favour of human rights and peace, and we are in favour of non-interventionism. I said, What happens if you need to intervene to protect the human rights and the peace? We moved on to the next course. But there is a debate to be had, and some of the Latin American countries share my implied analysis in that question, 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. Q146 Mike Gapes: At Prime Minister s questions today, the Prime Minister responded to a question by saying that the Government was going to push, with the French, a Security Council resolution on the situation in Syria. Do you think that Brazil will abstain on that, or is it likely to support it? Mr Browne: I will answer, if no one else is volunteering to do so first. I very much hope that it would vote in favour of the position that the Prime Minister outlined, for the reasons that I have just expressed. Q147 Mike Gapes: I did not ask what you hoped; I asked what you thought would happen. Mr Browne: It will be an interesting test of whether Brazil has moved further down the track. I hope that it has, and that it will vote in the way that the Prime Minister described, but that is a decision for Brazil to make. Angus Lapsley: Intervention means many different things. Clearly, many Latin American countries are uncomfortable with hard-edged intervention. That is partly to do with their own post-colonial histories, and they have a strong sense of the importance of preserving the integrity of national sovereignty. We understand that, but there are other ways in which they can help. 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, at a stage when their public opinion and political culture are not yet in the position of being ready to accept the harder edge of intervention. Q148 Mike Gapes: That might be in certain countries say, Egypt or Tunisia but you are not talking about Libya at this stage, are you? Angus Lapsley: Maybe not at this stage, but Brazil has significant interests in Libya; it has quite a significant oil presence there, for example. Q149 Mike Gapes: Is that why it abstained? Angus Lapsley: Like many of us who have interests in Libya, it had to balance those interests and think about how it responded. My point is that, as Libya moves forward in its transition as we hope it will, the Brazilians and others in the region have a role in supporting economic growth and reform in those countries, as well as helping them to build a sustainable democracy after years and years of something else. Q150 Mike Gapes: There was a reference to the position that was taken on human rights in Iran. I am interested to know whether there is a follow-up to that. Are we likely to see a repetition of the new Brazilian President meeting and having photographs with the President of Iran in the future, as happened a year ago? That was controversial. Also, are we likely to see a repetition of the initiative that Brazil took at that time with Turkey on the Iranian nuclear programme? Is there a view on how that has been perceived? Do we have an assessment on whether that approach is now seen to have been a mistake and whether Brazil is now moving, because of this state position on human rights, to a slightly different approach? Mr Browne: My hope is that we will not see a repeat of that photo with the new President of Brazil. That is not in Brazil s interests, and I hope that Brazil sees why Britain and other countries take the view that we take on Iran for a whole range of reasons, with human rights high on that list, but also including nuclear proliferation and other concerns that we have. That is not to say that I do not think that Brazil should have a wide and ambitious foreign policy. It is entirely up to Brazil to have that. 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. Q151 Mike Gapes: It was a year ago, when President Lula made his initiative. At that point, for the first time ever, Brazil voted against the US. Some academics interpreted that as a symbolic statement of

92 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 we take? Mr Browne: I do not think that Brazil would regard itself as being part of third-world solidarity, but it may well regard itself as not having automatically to follow a leadership set for the Americas as a whole by the United States of America; that it is an independent power with its own ability to make decisions and to come to conclusions without being in harness with the Americans. That is true. There is no reason why it should be subservient to the United States or other countries. I would hope that in coming to those independent conclusions, it would be guided by the same considerations that countries like the United States or Britain have. It comes back to my earlier point that having a global role comes with all kinds of practical difficulties and obligations, as well as opportunities. Q152 Mr Watts: We have heard that Brazil wants to play a more important role on the world stage and we have talked about the likelihood that they would want to expand their military capacity. We have also heard that it is unlikely that they would want to develop a nuclear weapon system. Is that still the view? What sort of military presence does Brazil want to develop? Mr Browne: That is my understanding. When I visit Latin America, I am struck that there seems to be a very high degree of attachment to the concept of Latin America being a nuclear-free continent. I have not heard any particularly strong or compelling voices within Brazil or other Latin American countries that are arguing for a different approach. I would envisage, therefore, that Brazil would have an increased military capacity, which would reflect the fact that in the next few years it will become the fifth largest economy in the world. It already is, by a big margin, the biggest force in its particular continent, and it may well seek to have a military capacity that, as I say, in some way reflects that status. However, nothing that I have heard suggests that I should envisage them having a nuclear weapons capacity. Q153 Mr Watts: Turning to other areas where they may want to develop, one of the things that we could do or that we could have done is to support the nomination of a Brazilian for the IMF, 3 for example. Is that something that we actually considered or is it something that we do not think is desirable? Is supporting them in global institutional jobs, such as the one that I have just outlined, something that we think will help to lock in Brazil? Mr Browne: As I understand it, the lead department in Government on that specific decision is the Treasury rather than the Foreign Office. In general terms, however, we certainly do not have an antipathy to Brazilians occupying influential international positions. As I said, there are many Brazilians in their civil service and their public life who have a high degree of aptitude and experience, and where the most suitable candidate for a particular position is a Brazilian, I could not imagine any reason, in the vast majority of circumstances, why that person would not be the person who ought to occupy the post. The point 3 International Monetary Fund that I am making is that there is no general policy that we, the Europeans or the G8 countries, need to try and hoard all of the positions of international influence and ensure that the emerging powers do not start to get their hands on those jobs. If there are good people, we should consider them. Q154 Mr Watts: I was not saying that we would oppose it; I was merely trying to ask whether we would actually actively support such a nomination. Mr Browne: I could envisage circumstances Mr Watts: Do we work with the Brazilian government to actually support their applications for those sorts of posts? Mr Browne: In my limited experience of a year in the job, I am quite struck by how energetically countries lobby for their person to be considered for an international body. We get representations forcefully made, and at every single bilateral meeting Please bear in mind the qualities of our particular candidate for this particular post comes up on the agenda. Normally, there are three or four people in the running and all the countries are lobbying for it. All I am saying is that we do not have a list of preferred countries. We do not have a predisposition to always support the European or someone who comes from an English-speaking country or whatever other reflex starting point we might have. If the best person for a hypothetical global job was a Brazilian, I cannot foresee why there would be any barriers to us supporting the Brazilian. Q155 Mr Watts: But would it be a good idea for us actually to talk to them about their ambitions, what they would like, and how they see their role developing to take into account their growth in economic terms? Would it be a good idea to be seen as someone friendly to them and someone supportive, who will actively assist them in their policies? That would, in a way, assist our policies in Brazil. Mr Browne: I have no objection to that. Those are exactly the sort of conversations that we could have. We are seeking to demonstrate exactly that type of friendliness across a whole range of subjects on a daily basis. I do not measure friendship purely in terms of the number of people whom we support for nominations to international bodies, but the Brazilians certainly should not think that we have any antipathy to Brazilians occupying important international posts. On the contrary, we would be enthusiastic, and we would judge the candidates on their merits. The wider point is that, if anything, we might have a predisposition to support Brazilians or others from Latin America, for the reason that I gave about 10 or 15 minutes ago. If you look at the world 25 or 30 years ago, when I was growing up, one of the big changes, of course, was the reunification of Europe and the end of the Soviet Union, just under 22 years ago. The other extraordinary change, which is commented on far less and relates to the advance of democracy, if I can put it in those terms, is Latin America, which has undergone a complete transformation. In terms of it being a values ally, if I can put it in those terms, for Britain, Europe and North America as a whole, and an important counterbalance

93 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 happy position. I will give you a counter-historical narrative. Imagine if it had all gone in the other direction; we would be looking at a very bleak position indeed. Countries right across Latin America, including Brazil as the best or biggest example, have embraced free market economics. They have broadly embraced free trade, democracy, civil liberties, free media, and all the other values that we regard as important in this country, which is a huge step forward. We have no inclination not to support Brazilians. Actually, because we are very enthusiastic about that process, it may well be that a Brazilian, as a hypothetical person for a hypothetical job, would be someone we were very enthusiastic about. Q156 Mr Baron: There have been big oil discoveries off the coast of Brazil, if I may just turn us to the issue of trade, and the effect that trade can have on Brazil s economic and foreign policy. The twists and turns have been interesting, with regard to Brazil s decision on whether it will join OPEC. That has been linked to its desire to be a permanent member of the Security Council. How do you see the larger oil discoveries impacting on Brazil s economic and foreign policy? Mr Browne: Brazil is a very interesting country, in energy terms. I wrote down some statistics, because they tell a compelling story in their own right. 80% of Brazil s electricity is from hydro power. It says on my list that it has strong potential for wind, solar and wave power, which presumably means that it has not developed them properly, but Brazil clearly has all those advantages. It also produces a huge amount of biofuel, so it is in a position where it is meeting a very high amount of its existing energy needs from renewable sources. At the same time, it has the potential to be a major world oil power. Again, I am told that by 2015, it is possible that Brazil would be in a position where it is the sixth biggest producer of oil after get this Saudi Arabia, Iran, Iraq, Kuwait, and the United Arab Emirates. It would be the largest power in the world outside that hub in the Middle East, which would change the way that people perceive Brazil. That would change Brazil s economy, but of course, the difficulty then is how that transition could be made in a way that supports muchneeded infrastructure development, education, and other areas in which Brazil needs to improve in order to move forward economically. It would provide a lot of opportunities for British businesses, which is already the case with BG and BP. As I say, it also affects the balance of debate internally within Brazil, in terms of how it meets its growing energy needs. Q157 Mr Baron: I would not disagree with anything you have said, because that would change people s perceptions, but how do you think it would affect Brazil s foreign policy? For example, why do you think that, to date, Brazil has refused to sign up to OPEC? What is the logic behind that? Mr Browne: I do not know. To be honest, it is not an area that I have read analysis on the reasons why Brazilians think the way they do on OPEC so I am happy to seek guidance from people. Q158 Mr Baron: Perhaps somebody else wants to take that up. Angus Lapsley: Perhaps Vivien can reply to the specific OPEC point. On the foreign policy point, it probably does, or will, lead to a reinforcement of Brazil s sense that it is arriving on the world scene, and that it has the means the wherewithal to operate on it. To come back to Mr Watts s question about defence priorities, that is clearly a big factor, and one of the main areas it will invest in is the bluewater naval capacity to protect its offshore assets and so on. That will skew things. What you will not see is what we have seen in Venezuela, for example, which has used its oil money to pursue a very interventionist and quite idiosyncratic foreign policy around the region. I do not think that is Brazil s style at all. Q159 Mr Baron: There is quite a difference in approach. Angus Lapsley: Exactly. Vivien Life: We also have to look at how it is making that decision. In the end, it is a decision for Brazil itself. We would hope that as it increasingly becomes a supplier of oil, it will work closely with us on our agenda of how we try to respond to oil price volatility. We want to talk to Brazil about what kind of relationship it might want to have with the IEA, 4 as the IEA tries to tackle issues such as fossil fuel subsidies. We have been saying more generally that we want to work in partnership with Brazil in international institutions because we have common interests, and want to consider how it might work with us in the IEF. 5 We will be keen to build that partnership with Brazil, and we have stepped up that partnership on energy with a high-level energy dialogue, trying to address some of the issues collectively. We want the growth in oil production to be an opportunity that we seize on early; it is not just an opportunity for business, but from the point of view of energy security, we want to work with all multilateral institutions that cover oil. Q160 Mr Baron: On the OPEC front, there is a view that Brazil is perhaps trying to increase its room for manoeuvre. As the level of the oil price goes forever upwards, there is a need for OPEC members to balance their budgets. That gives the Brazilians a bit of leverage if they are outside OPEC when it comes, perhaps, to influencing the oil price. That is perhaps a debate for another day. Minister, you mentioned that you would like to see British trade increase I think you mentioned 4 billion from 2 billion. How was that figure arrived at? It seems to me that if you take the French or German models for promoting trade overseas, they have had more success than we have, certainly in Latin America, for a variety of reasons. I do not think that is due only to historical or cultural links, but those countries have a closer working relationship between 4 International Energy Agency 5 International Energy Forum

94 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 winning exports. How will we catch up? How will we double that figure, and how was the figure arrived at? Mr Browne: I am sure there are all kinds of clever calculations that arrive at the number being precisely doubled, rather than it being selected for more arbitrary reasons. Let me make a wider point. A statistic that is often quoted I have heard the Prime Minister say it is that Britain does more trade with Ireland than with China, India, Brazil and Russia combined. Everybody gasps at how astonishing that is, but it does suggest that we are still in the foothills and at an early stage of globalisation. We tend to think about what it is like to live in a globalised economy, but actually we are not in a fully globalised economy at all. In 20 or 30 years time, people will look back and think that it was an extraordinary delusion for us to think in 2011 that we were in a globalised economy. Even though countries are obviously going to do more trade in some areas with their immediate geographic neighbours, actual scope for trade with a country like Brazil, which has 190 million people and is growing more strongly than countries in Europe, is very high. We can try to improve our trade position through a number of means. Partly, we have to try to ensure that we win an overall values debate. I do not say that there is hostility in Brazil to that, but Britain is one of the leaders in the world in arguing for free trade and open markets. We even have difficulties sometimes with the United States in this discussion. Certainly when the European Union is looking to negotiate trade agreements, Britain tends to be at the forefront of arguing for more open markets and more free trade. We need to make sure that that argument is intellectually won around the world, which is sadly not the case at the moment. We need to make sure that the business environment improves in Brazil. These are all general points, and they would apply to Germans and Italians as well. The World Bank has rated Brazil as the 127th most easy country in the world to do business in. The complaint that you will hear when you are in Brazil is about the practical difficulties of trying to do business, and some of that may be about lobbying for individual businesses and individual contracts. We should not forget, of course, the smaller businesses that are looking to expand; it is not just about the prestige projects that leading politicians have photo ops with when they go to countries, but the smaller ones that are not so immediately apparent. Affording attention to Brazil is important in terms of how we are perceived in Brazil, but I also think that it is important in terms of how Brazil is perceived here. The week after next, the Deputy Prime Minister is going to Brazil. I am going with him. Jeremy Hunt, the Culture Secretary, is going, as is David Willetts, the Minister for Universities and Science. A number of vice-chancellors and business people are going, as well. The greatest value that I attach to that is the same point as I made earlier: if you had a league table of continents of the world, people in Britain not just the British Government would, if they were honest with themselves, put Latin America bottom of the table. If you ask a lot of businesses what globalisation means to them, they say China or Vietnam. They look east; they do not look south-west. Quite a lot of businesses could do very well in Latin America, but have not particularly thought to expand there. In some cases, that may be because the Americans got there first or the market is already at a high degree of saturation, but in other cases it is just because the path has not been particularly well trodden by British businesses. When talking to other business people in Britain, therefore, we do not tend to end up sparking up a conversation about opportunities in Brazil or other Latin American countries because the conversation is all about what is happening in South Korea, Thailand, Indonesia or wherever. We are keen on having an EU-Mercosur trade agreement, and there is value in general UKTI-style events. We had the Foreign Office so-called leadership week about three weeks ago when our ambassadors and heads of mission from all round the world were back in London. As part of that, for example, one evening we had an event in the City of London to which all the Latin Americans were invited, along with the British ambassadors who had come home, Latin American ambassadors here in London, and lots of businesses that are investing in Latin America. I am not saying that that, in itself, transforms our trade relationship, but I am not dismissive of those events. They can add value, as well. We need to try to work across the piece. To return to a point that I was making about an hour ago, there are aspects of Britain s offer that could become increasingly relevant and compelling to Brazil. Probably the second most popular sport in Brazil after football is Formula 1 motor racing. I remember having this conversation with the Brazilian Foreign Secretary. I said, Isn t it striking that most of the famous European car brands are German and French, to an extent, but that nearly all the Formula 1 teams are based in Britain? A lot of the technical expertise that I was using to illustrate that point is relevant to a country as it goes into that stage of development. Brazil is, I am told, regarded as the most impressive country outside the G8 for scientific innovation, and we have an increasing amount of collaboration on scientific research. Service-based industries will become more important that is a type that Britain is strong at. There are lots of culturaleducational links. It may well be that in addition to our specific targeted efforts, the Brazilian economy will start to become more compatible with what Britain has to offer, so we will get a perfect comingtogether of conscious efforts by the Government and the requirements of the Brazilians. Q161 Mr Baron: Do you accept that in the past, British companies trying to win business have had a laissez-faire approach, and that we need a more coordinated approach to bring some coherence? Mr Armour of UKTI suggested that, and said that they would try to make efforts in that direction. Is that something the FCO, in its somewhat limited capacity, can encourage, and what improvements do you think it can make?

95 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 approach. Let me explain. Having a systematic coordinated approach to trying to make sure that British businesses have an introduction into the market place, being able to share with them our understanding of business opportunities, but also a wider understanding about where their labour market is placed, where their skill shortages are, what the cultural barriers are to investment, and lobbying the Brazilians to try to address market access issues that may be particularly difficult for British businesses in all those areas, I agree with the premise of your question. The only thing that holds me back from signing up to it 100% is that businesses are successful if they can produce goods and services that people want to buy, at a price they want to pay. I want Brazilians, and for that matter other people in the world, to buy British goods and services because they re the best goods and services available. We can lobby as much as we like, but if we don t have products that people want to buy at prices they want to pay, they won t buy them. There is an important role for a co-ordinated government approach, but I wouldn t underestimate the important role of innovative businesses coming up with superior products to those offered by French or German businesses. Angus Lapsley: May I make three points? First, one bit of the strategy on Brazil, which is not secret, is the establishment of a high-level CEO forum of Brazilian and British business people working to address the barriers that might exist, and to raise awareness of the opportunities that exist. Secondly, I am not responsible for UKTI s resources around the region, but it is looking at its presence in Brazil, and whether 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 HSBC, BG 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. 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. Q162 Chair: Will we be using the Olympics to promote trade between Britain and Brazil? Minister, you will remember that you gave evidence to us a few months ago on the opportunities posed by the Olympics. Mr Browne: Yes. Chair: Would you like to elaborate? Mr Browne: If I had a gold medal for every time I talked to Brazilians about the Olympics, I would be in the Steven Redgrave category daily. The Olympics are a big opportunity for us. The Brazilians are excited to be hosting the Olympics and the 2014 football World Cup. They are the two main global sporting events, and the Brazilians are hosting them back to back, for the first time in history, as far as I am aware. They are enthusiastic about the lessons that they can learn from us about the Olympic Games in all kinds of areas. One must get away from just thinking of the Olympics as a sporting event where people try to run as fast or jump as high as they can. In these terms, 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. I am sure that the media here can find areas where they feel that the system could be improved, but if you stop to think about it, this is an event with multiple venues and we are selling literally millions of tickets over two and a half weeks. Logistically, that is a very complicated exercise, which is potentially prone to fraud, for example, and to other abuses. We are sharing information in all kinds of areas, and they are learning from us. There are potential business opportunities that go way beyond thinking about it as a sporting event. The Olympic park in east London is a great showcase for British ingenuity in design and project management. I showed the Brazilian Ambassador around the 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 Q163 Mike Gapes: May I ask briefly about the environmental issues? Brazil has made efforts to tackle climate change. It is an important country because of the size of its forests and its sheer scale. What are we doing to support Brazil in its efforts on climate change? Mr Browne: May I start by agreeing with the premise of your question? Again, I have rustled up some fascinating facts, including that the Amazon is larger in square mileage than the EU. I do not know whether that tells you anything or whether you are interested, but it gives you a sense of scale. Certainly, the Brazilians regard their natural inheritance as one of the defining features of their country and are rightly very keen to preserve and protect that inheritance. We work closely with them on that. I am encouraged that President Rousseff is a keen champion of pro-environmental, climate-changemitigating policies. We work through our embassy in Brasília on projects and in areas where we think that we can be of value to the Brazilians, including the energy aspects that Mr Baron discussed a few minutes ago. In terms of a manifestation of 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 Brazilian. You might think that it would have been with another European. It suggests a positive expansion of our role in this area.

96 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 past 10 days about what they call a crisis Cabinet being established as a result of a 27% increase in deforestation in the Amazon in one year, principally in Mato Grosso, I think. How concerned are you about that? It has been suggested that there is a move in the Brazilian Parliament towards loosening the legislative restrictions by moving down from 80% to 50% on the protection of the forests of the Amazon. Do we have a view on that? Are we making representations? What do you think will happen? Is it clear that the Brazilian Parliament will go that way? If so, what are the implications? Mr Browne: 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. Q165 Mike Gapes: Which is on this 80% to 50% thing? Can you clarify? Mr Browne: She favours Brazil continuing to meet the more onerous end of the targets the 80% reduction, rather than a less ambitious reduction. On a scale of how environmental someone is, she is on the most environmental end of the scale, and we are happy she is in that place. Q166 Mike Gapes: We have been told by academics and others that the percentage will be reduced from 80%, but the question is how far it will be reduced. I do not know whether that is true. Vivien Life: That is not our understanding. The 80% is a domestic commitment, but Brazil has made commitments in the UNFCCC 6 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. But, as the Minister said, the recent figures are worrying. It is a politically difficult thing for the President to deliver, given where the Parliament is. We will be doing all we can to support Brazil, politically and technically, in delivering its commitments. Q167 Mike Gapes: When you say help, do we actually send experts to give advice, or should we be listening to the Brazilians, given that it is their climate and that they might have a better understanding of it than we do? Vivien Life: We let them ask us for what help they want. We would not presume to send expertise that wasn t asked for, but we have this close relationship and partnership. When Caroline Spelman visited Brazil, we talked about potential funding for policies to tackle deforestation and so on from the UK s climate finance. It is about talking to the Brazilians, 6 United Nations Framework Convention on Climate Change seeing where we can help and support, and not about sending experts unless we are asked. Q168 Sir John Stanley: Should not the Foreign Office and the British Government as a whole be doing much more to bring home to the British people at large the critical connection between preservation of the Brazilian rain forest and our own position here in the UK? Is it not the case that very substantial costs will be falling on British taxpayers and British electricity consumers are falling on them now as a result of the British Government s targets to reduce CO 2 emissions? Those costs and the sacrifices made by the British people will be shown to be absolutely futile unless, first, China is weaned off its coal-fired power station programme and, secondly, the Brazilian rain forest is protected. Should that message not be made much more clearly by the British Government? Mr Browne: This is a big subject. I feel that the Climate Change Secretary is best equipped to give you a detailed answer, but let me make a few observations. I think that there is value in Britain demonstrating global leadership. We have almost 1% of the world s population and account for about 2% of the world s carbon emissions, so it is true that 98% of the world s carbon is not emitted by us but, on the other hand, we are emitting more than double the amount per capita of the global average. There is a reasonably compelling case that we could do better and show greater leadership, and that that would be advantageous to us. The economies in the world that will be well equipped to prosper in 10, 15 or 20 years time will not be those belching out large amounts of black smoke but those which have got ahead of the game in being innovative and preserving energy. I note, just this week, the German plans for reconciling their views on nuclear power and future energy requirements. There is a big gap there that it will need to fill with greater energy efficiency and more renewables. That is a potential opportunity for it if it gets into areas where there is high demand in the future for more energy efficient products. It is overtaking us in that regard, so we need to be mindful of that. China, of course, has a huge population. It argues, rightly, that it emits far less per capita than the United States, but it is catching up in a way that should, and does, give us cause for concern. Having said that, I think sometimes the British view of China, when it comes to renewable energy and the means for tackling climate change, lacks appreciation of some of the measures that it has taken. I was very struck, when I was on a train journey through China a few months ago, how virtually every house I went by had solar panelling on the roof, in a way that you would never see on a train journey through Britain. There is quite a high level of alertness to these issues in China. That does not mean to say that more cannot be done, but it is not unequivocally in a place that we would disapprove of. I also take your point about the Amazonian rain forest, which is why we make this point forcefully to the Brazilians. I do not think that they are in the opposite

97 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 wish to address concerns about climate change, but also for the reasons I mentioned about them rightly feeling proud about their own natural inheritance. I do not think that the Brazilians wish to degrade the Amazonian rain forest, but it may well be that a whole series of incremental, small measures taken by individuals lead to an overall degradation, which is not what the overall government policy would wish it to be. So what we need to do is ensure that the Brazilians have the systems and the continued resolve to tackle a problem that we agree, with them, needs to be tackled. That is a long answer, but it is quite a big subject. Q169 Sir John Stanley: It is. I want to raise with you just one other aspect of this. Minister, earlier on you referred, in answer to another question, to the way in which Brazil has become an absolute major in biofuels, as has the United States. Minister, would you not agree that there are two huge downsides on biofuels? First, it is, of course, a spur to land clearance and potentially to deforestation, which is the very thing that you want to stop happening in Brazil, as land is cleared for crop growing. Secondly, every bit as important if not more important is the fact that, if you devote land for growing crops which you are going to pour into petrol tanks and motor vehicles and not enable people to have food, you then produce a real spur to world food prices which hits the very, very poorest people. Those are two really major downsides in the Brazilian march into biofuels. Is the British Government relaxed about that? Is the British Government trying to persuade the Brazilian government, for those reasons, to modify its rush into biofuels? What is the British Government s position towards this? Mr Browne: Let me bring Vivien in, in a second. I think I would say that they are two potential downsides, rather than automatic downsides. I accept that, if huge acreages of virgin rain forests are being cleared in order to make way for growing biofuels, that is taking two steps back before you take one step forward in terms of your contribution to addressing climate change. If, on the other hand, biofuels are being grown on land that was previously left fallow, then that may represent a reasonable step forward. Brazil, of course, also grows huge amounts of food. It has the capacity to grow food way in excess of its own domestic requirements and already does so, but it could grow a lot more still without clearing rain forests in order to do it. So I would not automatically assume that the consequences of growing biofuels will either be to ruin rain forest or to lead to Brazil failing to match its potential in terms of food production. There is a risk in both those regards and you are right to highlight that risk. That is the risk that we need to be mindful of. Vivien Life: It would be wrong to set this up as the UK telling Brazil what its responsibilities are. It is something that Brazil is herself very conscious of. As international standards for what constitutes sustainable biofuels are being developed not least by the EU Brazil should be part of that debate about wanting to develop standards, because we believe that Brazil s biofuels are a lot more sustainable than some elsewhere. So, again, it is an important issue that we can address through our high-level energy dialogue. We can ensure that we have a mutual understanding of this. We do see biofuels as an important part of the energy mix if we are going to meet the carbon emissions targets that we were talking about earlier. Chair: I thank Mr Lapsley, Mrs Life and yourself, Minister, for coming along today. It is very much appreciated. We are off to Brazil at the weekend and we go there much wiser than we would have done if you had not come. Thank you very much, indeed. Mr Browne: May I say quickly Chairman that I am genuinely pleased that you are going? It sends an important signal that the Committee is taking an interest in Brazil. Certainly, a constant theme of my conversations in the Department and wherever I go is my desire to see greater attention given by British public opinion and the British Parliament to Asia, Latin America and those parts of the world that are evolving quickest. We should not just content ourselves with the more familiar set of countries that we have grown familiar with over recent decades. I regard your interest as an entirely welcome and helpful part of that process. Have a good time. Chair: Thank you. We appreciate the support given to us by the Foreign Office generally.

98 cobber Pack: U PL: CWE1 [SE] Processed: [ :41] Job: Unit: PG04 Ev 44 Foreign Affairs Committee: Evidence 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 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 2 4 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

99 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 45 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 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 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 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.

100 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 46 Foreign Affairs Committee: Evidence 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 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 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 E 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 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.

101 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 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 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 2008 Q 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

102 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 48 Foreign Affairs Committee: Evidence 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 onefourth of that registered in 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 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 Assuming current trends continue, Brazil will achieve this target before The fact that Brazil is on track to achieve this target is supported by an assessment of the MDGs in 68 priority countries in This evaluation showed that Brazil displays the second largest reduction in infant/child

103 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 49 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 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 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 years is 0.61%; 0.41% among women and 0.82% among men and has remained stable since 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 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 , 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 km 2 ), 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 (29,000 km 2 ), deforestation in the Legal Brazilian Amazon fell in (6,541 km 2 ) 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 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 CO 2 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 CO 2 emissions, 76.3% of which stem from changes in land and forest use primarily in the Amazon and Savanna regions. In 2005, CO 2 emissions reached 1.57 billion tons, 69% greater than the level registered in 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 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 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 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.

104 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 50 Foreign Affairs Committee: Evidence 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 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 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 ( english).

105 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 51 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, 4 6 June 2012), both as an assessment instrument for the results achieved since the United Nations Conference on Environment and Development (Rio 92) 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 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 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.

106 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 52 Foreign Affairs Committee: Evidence 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 longterm 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 and a further US$ 376 billion after 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 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 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/ km 2 ) 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/ km 2 ). 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.

107 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 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 ). 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

108 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 54 Foreign Affairs Committee: Evidence 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 Executive Summary Written evidence from Michael Evans 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 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.

109 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev Michael left CMR in March 2008 and started developing his water turbine concept, forming Green-Tide Turbines Ltd in March 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.

110 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 56 Foreign Affairs Committee: Evidence 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 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.

111 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 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 years and this is certainly true with regard to that allocated to UKTI in this field in the last 5 6 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 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.

112 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 58 Foreign Affairs Committee: Evidence 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 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 energyrelated 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.

113 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev Oil and Gas Scenario GO DF 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 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. 2009:17 54.

114 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 60 Foreign Affairs Committee: Evidence 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 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 ( ) 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 Brazil s oil production reached million barrels per day (bpd), rising 6.3% in comparison to January However, oil production dropped around 2.65% over December 2010, but was higher than November s oil production of million bpd. Gas production reached 66 million cubic meters per day, 13.2% higher than January 2010, and 4.3% lower than December Brazil s oil and gas production reached 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

115 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 61 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 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

116 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 62 Foreign Affairs Committee: Evidence 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 There have been three visits, all accompanied by business delegations, in the last four years, with the next one scheduled for June 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.

117 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 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.

118 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 64 Foreign Affairs Committee: Evidence 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

119 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 65 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 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 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 s, 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 ( ) 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 , of which 2.5 million is grant-in-aid. English Our English activities are in four broad areas: policy, teachers, learners, examinations. In 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 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

120 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 66 Foreign Affairs Committee: Evidence 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 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 postgraduate courses in overseas institutions. Arts In 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 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 , we will focus on branding, fundraising and legacy including the establishment of a Creative UK curatorial group. Education and Society In 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 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 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 BBC Global News in Brazil Written evidence from the BBC World Service 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

121 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 67 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 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 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 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 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.

122 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 68 Foreign Affairs Committee: Evidence 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

123 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 69 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

124 cobber Pack: U PL: CWE1 [E] Processed: [ :41] Job: Unit: PG04 Ev 70 Foreign Affairs Committee: Evidence 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 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 cooperation 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 The conference will mark the 20 th 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 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 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

125 cobber Pack: U PL: CWE1 [O] Processed: [ :41] Job: Unit: PG04 Foreign Affairs Committee: Evidence Ev 71 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, LGBT 5 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 Printed in the United Kingdom by The Stationery Office Limited 10/ Lesbian, gay, bisexual and transgender.

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