House of Commons Foreign Affairs Committee

HC 949 Published on 18 October 2011

by authority of the House of Commons London: The Stationery Office Limited

£15.50

House of Commons

Foreign Affairs Committee

UK–Brazil Relations

Ninth Report of Session 2010–12

Report, together with formal minutes, oral and written evidence

Ordered by the House of Commons to be printed 11 October 2011

The Foreign Affairs Committee

The Foreign Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Foreign and Commonwealth Office and its associated agencies.

Current membership

Richard Ottaway (Conservative, Croydon South) (Chair) Rt Hon Bob Ainsworth (Labour, Coventry North East) Mr John Baron (Conservative, Basildon and Billericay) Rt Hon Sir Menzies Campbell (Liberal Democrats, North East Fife) Rt Hon Ann Clwyd (Labour, Cynon Valley) Mike Gapes (Labour, Ilford South) Andrew Rosindell (Conservative, Romford) Mr Frank Roy (Labour, Motherwell and Wishaw) Rt Hon Sir John Stanley (Conservative, Tonbridge and Malling) Rory Stewart (Conservative, Penrith and The Border) Mr Dave Watts (Labour, St Helens North)

The following Member was also a member of the Committee during the parliament: Emma Reynolds (Labour, Wolverhampton North East)

Powers

The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

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The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including news items) are on the internet at www.parliament.uk/facom. A list of Reports of the Committee in the present Parliament is at the front of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only.

Committee staff

The current staff of the Committee are Mr Kenneth Fox (Clerk), Mr Eliot Barrass (Second Clerk), Dr Brigid Fowler (Committee Specialist), Ms Zoe Oliver-Watts (Committee Specialist), Mr Richard Dawson (Senior Committee Assistant), Jacqueline Cooksey (Committee Assistant), Mrs Catherine Close (Committee Assistant) and Mr Alex Paterson (Media Officer).

Contacts

All correspondence should be addressed to the Clerk of the Foreign Affairs Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 6394; the Committee’s email address is [email protected]

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


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.


Conclusions and recommendations

1. We welcome the Government’s public commitment to a stronger bilateral relationship with Brazil. The growing political and economic importance of Brazil represents an opportunity for the UK, not a threat. We conclude that the Government is correct to identify the opportunities that Brazil’s rise brings. We recommend that it continue to invest effort in revitalising the UK’s relations with Brazil, notwithstanding any temptation to redeploy resources to other parts of the world, such as the Middle East and North Africa, where momentous events have been occurring. (Paragraph 14)

2. We conclude that the efforts made by the Government to strengthen the UK’s bilateral relationship with Brazil are welcome. We note that the forthcoming London Olympic and Paralympic Games will be invaluable in bringing the UK and Brazil closer together. We further conclude that while the Government’s efforts are to be welcomed, they should be only the beginning. We recommend that the Government view its aspiration to enhance the UK-Brazil relationship as one requiring a long-term commitment to maintain the recent momentum. We will continue to monitor developments in the bilateral relationship throughout this Parliament. (Paragraph 27)

3. A double taxation agreement between the UK and Brazil would not alter the commercial relationship between the two countries overnight, but it would be of practical assistance to UK companies trading in Brazil and be an important symbolic step in highlighting the importance that the UK Government is placing on the improved trade links. We recommend that the Government continue to lobby hard on this issue during upcoming Ministerial visits and at the annual UK-Brazil Joint Economic and Trade Committee meeting. (Paragraph 32)

4. We conclude that the Government’s proposed changes to student visa entry requirements may make it more difficult for Brazilian students to study in the UK, at the very time when the Brazilian government is proposing to increase the number of Brazilians studying aboard. We recommend that the FCO explore with the Home Office what steps can be taken to ensure that the new visa regime does not prevent suitably qualified bona fide Brazilian students from entering the UK to study. We further recommend that, in its response to this Report, the FCO inform us of the outcome of these discussions. (Paragraph 39)

5. Given the importance that Brazil is placing on a successful outcome to the forthcoming Rio+20 Conference, we conclude that the conference represents a golden opportunity for the UK to show its commitment to a stronger bilateral relationship. We recommend that British Ministers, diplomats and officials should liaise closely with their Brazilian counterparts during the run-up to Rio+20, not only to maximise the chances of a successful outcome to the conference but, as an ancillary benefit, further to enhance UK-Brazil relations. We welcome the work of our colleagues on the Environmental Audit Committee in this area. (Paragraph 42)

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


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)


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)


1 Introduction 1. The Government has committed itself to revitalising relations between the UK and Latin America in general and Brazil in particular. Shortly after coming to office, in June 2010, the Government announced that it would “seek close engagement with [...] Brazil”.1 In November 2010, the Foreign Secretary, Rt Hon William Hague MP, giving the “Canning Lecture” at Canning House, stated that:

Now is the time for Britain at last to think afresh about Latin America and the opportunities it presents for political co-operation and trade and investment that will benefit all our citizens.

He went on to say that the Government would focus its diplomatic efforts on creating a stronger relationship between the UK and Latin America.

Latin America must be a key focus of a foreign policy that seeks, as ours does, to build up new and strengthened relations in the world in pursuit of prosperity and security.2

2. In July 2010 we agreed to conduct an inquiry into UK-Brazil Relations early in the Parliament. This inquiry would build on work by our predecessor Committee in the last Parliament into the relationship between the UK and the other so-called “BRIC” countries,3 Russia, India and China.4

3. On 2 March 2011 we held an informal private seminar with Mr Angus Lapsley, Director, Americas, and Mr Matt Field, Head of Brazil and Southern Cone Team, Foreign and Commonwealth Office (FCO), and separately with Professor Anthony Pereira, King’s College, London, Michael Reid, The Economist, and Silio Boccanera, O Globo. We are grateful to the participants in this seminar, which helped us to take decisions on the scope of the inquiry.

4. On 31 March we announced terms of reference for the inquiry. The Committee would examine the following topics:

• Brazil as an international actor. Brazil’s interaction with the UN and its role on the international stage on issues such as nuclear non-proliferation;

• Trade. The role of UKTI in promoting trade in Brazil, and the experience of British companies who have attempted trading in Brazil;

• The environment. Brazil’s management of the rainforest, and bilateral and multilateral efforts to prevent climate change; including the Cancun Conference;

1 FCO Business Plan Update, June 2011

2 Foreign Secretary, Canning Lecture, Canning House, 9 November 2010. Canning House is the home of the Hispanic and Luso Brazilian Council http://www.canninghouse.org/

3 BRIC is an acronym standing for “Brazil, Russia, India and China”.

4 See: Foreign Affairs Committee, Seventh Report of Session 2005–06, East Asia, HC 860; Foreign Affairs Committee, Fourth Report of Session 2006–07, South Asia, HC 55; and Foreign Affairs Committee, Second Report of Session 2007–08, Global Security: Russia, HC 51.


• Energy security. The discovery of large stocks of oil and gas in Brazilian waters;

• Security and criminality. Brazil’s role as a regional power in areas such as the Falklands and the prevention of the transit of narcotics through South America into Britain.

5. We held three evidence sessions with expert witnesses and the relevant Minister. These were as follows:

• On 27 April we took evidence from Mr Neil Atkinson of Datamonitor, Paul Domjan, an energy consultant working for John Howell and Company, and Dr Frank Rosillo-Calle, a research fellow specialising in energy production at Imperial College, London, on the topic of energy security; Mark Bishop of SOCA on the topic of security and criminality; and David Norman and Dr Sandra Charity of WWF on the environment;

• On 11 May we took evidence from Nicholas Armour and Tony Lamb, UKTI, and Philip Brown from the Department for Business, Innovation and Skills, on trade matters, and Professor Andrew Hurrell, University of Oxford, and Dr Marieke Riethof, University of Liverpool, on Brazil as an international actor.

• Our final oral evidence session took place on 8 June when we took evidence from Jeremy Browne MP, the FCO Minister with responsibility for South America. Mr Browne was accompanied by Angus Lapsley, Director, Americas, and Vivien Life, Acting Director of the Prosperity Directorate, FCO.

We received 11 pieces of written evidence. We would like to thank all those individuals and organisations who gave written and oral evidence to our inquiry.

6. We concluded our inquiry with a visit to Brazil on 13–17 June. We held meetings with interlocutors in Rio de Janeiro, Brasília and São Paulo. The itinerary of our visit is annexed to this Report. We would like to thank all our interlocutors during the visit, as well as the staff of the British Embassy and other FCO posts in Brazil who did an excellent job in organising the visit.


2 Government policy towards Brazil

Why is the FCO promoting a stronger bilateral relationship?

7. The Government’s stated emphasis on relations with Brazil aims to reverse a long-term pattern in diplomatic relations whereby the UK has “disengaged” from Latin America. At the time of the First World War, 50% of foreign investment in Latin America was British, while 20% of Latin America’s total trade was with the UK. At present, by contrast, just over 1% of international exports to Latin America are from the UK. In his Canning Lecture, the Foreign Secretary noted that, the UK’s “trade with Brazil—a country of almost 200 million people—is less than half our trade with Denmark” and Germany exports nearly four times as much to Latin America as the UK. This long-term pattern of economic disengagement has been matched diplomatically. Since 1998 the FCO has closed four British embassies in the region. This long period of disengagement has reduced the UK’s influence in the region, Brazil in particular; according to Jeremy Browne, “in many regards we are behind the Germans, the Italians, and even smaller European countries like the Netherlands, in aspects of our relationship with Brazil”.5

8. The FCO’s renewed emphasis on the bilateral relationship stems from a growing awareness that, in the words of the Foreign Secretary, “Brazil matters”.6 Brazil’s growing economic strength is leading to a global recognition of its actual and potential diplomatic power. While the Foreign Secretary has identified Latin American countries as “one of the undisputed engines of the international economy”, and Mr Browne has noted that “Brazil is the market leader. Its GDP is more than half the total GDP of South America,” the FCO has also identified Brazil as important to other areas of the UK’s vital interests. In his Canning Lecture, Mr Hague identified a strong working relationship with Brazil as vital to the UK’s interests with regards to:

• International relations. “We are in a new phase in the concert of nations, in which states that have not traditionally dominated or sought dominance have an equal role to play in world affairs. [...] we cannot protect the interests of British citizens unless we look beyond Europe and North America.”

• Trade and investment. “We will look for new economic opportunities, encouraging investment in the UK, working to raise the profile of the region with British business, and helping British business access markets in the region.”

• Ecology. Latin America countries contain “at least 40% of the world’s remaining rainforest, 35% of global reserves of freshwater and 25% of the world’s cultivatable land.”

• Security, including issues of drug trafficking.7

5 Q 122

6 Foreign Secretary, Canning Lecture, Canning House, 9 November 2010

7 All quotes are from the Foreign Secretary’s “Canning Lecture” of 10 November.


9. Our witnesses agreed that the FCO was right to focus on Brazil as a growing power and had correctly identified the ways in which Brazil’s rise was likely to directly impact on the UK’s interests.8

10. Our witnesses were unanimous in their assessment of Brazil’s importance in global energy markets. They noted the discovery of large offshore oil deposits in Brazilian waters. Mr Atkinson told us that “Brazil is going to have an increasingly important role to play in the global oil and gas picture for the next 20 or 30 years or so”.9 Mr Domjan agreed, calling the recent discoveries important on a “global scale”.10 Dr Rosillo-Calle told us that “in future Brazil is going to be a major player [in the energy sector], I am convinced of that”.11

11. With regard to criminality, Mark Bishop of SOCA told us that “the 40 large container ports on its coast have led to it [Brazil] becoming a major transit route for cocaine from South America to mainland Europe and Africa”.12 Mr Bishop also identified Brazil’s importance as a source of organised immigration crime, money laundering and cybercrime.13 Mr Bishop further noted that the Brazilian federal police were focused on tackling the problems caused by cocaine production in South America.14

12. Representatives of UKTI stressed the commercial importance of Brazil. Nicholas Armour suggested that Brazil’s economic growth was the key determinant in the UK’s commitment to the area, “Brazil is a designated high-growth market for UKTI [...] It is a BRIC for no other reason than it is a high-growth market.”15

13. Dr Riethof gave an overview of Brazil’s growing importance in global politics:

Brazil is a growing and booming economy. [...] Apart from the economic importance of Brazil, it is also a regional and international player. Regionally, it is strengthening relations with neighbouring countries and promoting regional integration, not just economically but politically. It uses that regional integration to promote its own global role.

Globally, Brazil’s economic importance is crucial, but it is trying in various other ways to establish its international reputation. [...] It also has an extensive range of relations—formal and informal—with countries around the world.16

14. We welcome the Government’s public commitment to a stronger bilateral relationship with Brazil. The growing political and economic importance of Brazil represents an opportunity for the UK, not a threat. We conclude that the Government is correct to identify the opportunities that Brazil’s rise brings. We recommend that it

8 See: Q 2, Q 22, Q 63, Q 66 and Q 95.

9 Q 2

10 Q 2

11 Q 2

12 Q 22

13 Q 33

14 Q 30

15 Q 66

16 Q 95


continue to invest effort in revitalising the UK’s relations with Brazil, notwithstanding any temptation to redeploy resources to other parts of the world, such as the Middle East and North Africa, where momentous events have been occurring.

What is the nature of the relationship and how is it being strengthened?

15. The FCO is broadly optimistic about the current nature of the bilateral relationship and its potential for future growth. Its written evidence describes the relationship as “good, but under-developed”.17 Jeremy Browne told us that:

When I was in Brazil about three weeks ago, it was quite striking that the general view of Brazilian opinion formers [...] was that they were well disposed towards Britain. They probably look more towards Europe than towards other countries in South America for inspiration, whether on politics, culture or anything else. We do not, however, have a privileged place. [...] Brazil is well disposed towards us, but it does not give us automatic bonus points that are not earned in terms of our relationship with it. We have a good opportunity, but it is up to us to take it.18

Mr Browne also suggested that the UK benefited from “a high degree of compatibility between our political approach and that of the Brazilians”. This compatibility made it more likely that a strong bilateral relationship, based on “common values”, would be formed, the result being that “in political, values and economic terms, there is a greater marriage between what we offer and what the Brazilians require—therefore, to the mutual benefit of both of us—than may be the case with some other countries”.19

16. The Government’s specific ambitions with regards to the bilateral relationship are set out in a “more strategic, cross-Whitehall approach to Brazil” which has been agreed by the National Security Council sub-committee on the Emerging Powers (NSC(EP)). This strategy aims to deliver a “step-change” in the relationship by 2015. In particular the Government aims for:

• The doubling of UK exports to Brazil from £2 billion per annum to £4 billion;

• The UK to become one of the top 10 recipients of Brazilian FDI [foreign direct investment];

• UK companies to win major contracts for World Cup 2014 and Rio 2016 Olympics;

• A sharp increase in UK–Brazil research and development collaboration, particularly in high-tech spin-outs and SMEs [small and medium enterprises];

17 Ev 44, para 5

18 Q 122

19 Q 125


• An ambitious EU-Mercosur20 Free Trade Agreement, and progress towards a successful Doha round;

• London 2012 [Olympics] increasing positive perceptions of the UK in Brazil, 50% more Brazilian tourists visiting UK per year;

• Closer co-operation with Brazil on climate change, biodiversity and deforestation;

• UK–Brazil co-operation on development in other regions, especially Africa; and

• Greater UK–Brazil collaboration on international security challenges, on the UN Security Council and in other bodies.21

17. Jeremy Browne told us that to achieve these aims the Government was seeking to “increase engagement across the board”. This includes an increase in UK diplomatic representation in Brazil and more regular Ministerial visits. The table below sets out which Ministerial visits to Brazil have taken place since the start of the present Parliament:

Date MinisterAugust 2010 Vince Cable, Secretary of State for Business, Innovation and Skills

September 2010 Gerald Howarth, Minister for International Security Strategy (MOD)

February 2011 Lord Brittan, Prime Minister’s Special Adviser on Trade

April 2011 Baroness Neville-Jones, Minister of State for Security and Counter Terrorism (Home Office)

April 2011 Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs (DEFRA)

April 2011 Gerald Howarth, Minister for International Security Strategy (MOD)

May 2011 Jeremy Browne, Minister of State, FCO

June 2011

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

October 2011 Simon Burns, Minister of State, Department of Health

In addition, the Lord Mayor of London led a business delegation to Brazil in June 2011 and in September 2011, the Prime Minister and Foreign Secretary held bilateral meetings with their Brazilian counterparts.

18. The FCO described for us the British Government’s representation in Brazil:

The UK is currently represented in Brazil with, an Embassy in the capital Brasília, and Consulates in São Paulo (focused on commercial work generally) and Rio de Janeiro (focused on consular work, the energy sector, defence sales and the opportunities arising from the London-Rio Olympics and the World Cup in Brazil).

20 Mercosur (or Mercosul) is a free-trade bloc founded in 1991 and incorporating Argentina, Brazil, Paraguay and

Uruguay.

21 Ev 44, para 4


There are also small commercial offices in Recife and Porto Alegre. There are currently 28 UK-based staff in the network, and 233 locally-engaged staff (including a large guard force).22

In addition, the British Council—which is funded in part by a direct grant from the FCO—maintains a presence in Brazil. It has 39 staff based in the country, in four locations (Brasília, São Paulo, Rio de Janeiro and Recife). The British Council’s Brazil operation has a budget of £3.35 million in 2011/12, of which £2.5 million is FCO direct grant-in-aid.23

19. Changes to the FCO’s global network were laid out in an oral statement by the Foreign Secretary on 11 May 2011. Mr Hague announced that the UK Government “will also expand substantially our diplomatic strength in Brazil [and] open a new Consulate-General in Brazil at Recife.”24 He further indicated that “about half [of the additional staff allocated to] countries such as Brazil, Turkey, Mexico and Indonesia—will be UK-based.”25 The FCO’s Director, Americas, Mr Angus Lapsley, told us that:

we will be putting probably five to six additional diplomats into the Brazilian network over the next 12 months or so. We are going through recruitment processes at the moment, making sure that they have the right language skills and things like that. In terms of absorption capacity and actually making sure that we are putting people in who have real jobs to do, that feels about right to me.26

Mr Lapsley also told us that as well as increasing the size of the UK diplomatic presence in Brazil, the FCO had also “upgraded” the post of Ambassador to reflect the country’s growing importance:

The job of Ambassador in Brazil is now one of the top jobs in the Foreign Office. It is one of the 10 or so SMS327 or director-general level ambassadorships. It really is one of the most highly sought-after jobs.28

20. During our session, as well as discussing the future plans for the FCO’s diplomatic representation in Brazil, we also questioned the Minister on the FCO’s past performance. Jeremy Browne conceded that, previously, the FCO had not always adopted the correct tactics and tone to achieve its diplomatic ends and had perhaps been too focused on issues such as climate change to the detriment of “traditional” diplomacy. He told us that this would change:

this Government has shifted the emphasis away from what I described as campaign-mode diplomacy—important though some campaigns are—towards trying to make sure that we get the core basics right, in terms of our diplomatic offering.29

22 Ev 45, para 7

23 Ev 65

24 HC Deb, 11 May 2011, cols 1166–67

25 HC Deb, 11 May 2001, col 1171

26 Q 141 [Angus Lapsley]

27 SMS3 is an FCO staff grade equivalent to the Civil Service grade SCS3, broadly “Director General” level in the Home Civil Service and on a salary of between £101,500 and £208,200 (as of 8 August). HL Deb, 23 November 2010, col 300WA and cabinetoffice.gov.uk (accessed 8 August 2011).



When it was put to him in questioning that in the past the UK’s diplomatic representation in Brazil had been less successful than that of Germany and Italy in “penetrating the Brazilian elite”, Mr Browne replied “you are right to make the observations about Germany and Italy”. He noted that “the Brazilian political establishment, civil service, and diplomatic service are high calibre, impressive operators, and we need to ensure that we engage effectively at a level that is likely to maximise our influence”. 30 Mr Lapsley told us that there was a need to put “extra people in to do basic political economy work, so that we really understand what is happening in Brazil”.31 To remedy this failing, the Minister told us of his ambition to change the internal workings of the FCO to ensure that the highest calibre of candidates applied for postings to Latin America.32

The Olympic Games

21. The FCO has identified the London 2012 Olympic and Paralympic Games as an event which will improve perceptions of the UK across the world. We have commented on the FCO’s strategy for exploiting the Games in our recent Report on FCO Public Diplomacy: The Olympic and Paralympic Games 2012.33 Given that the next Olympic Games, in 2016, will take place in Rio de Janeiro, the FCO has acknowledged the opportunity for the shared experiences to bring the UK and Brazil closer together:

The adjacent hosting of the summer Olympics in London (2012) and Rio de Janeiro (2016) provides an important point of contact in the relationship. Brazilian organisers at the state and federal level have a keen interest in seeing firsthand how the UK has prepared itself.34

Jeremy Browne elaborated on this theme:

I showed the Brazilian Ambassador around the [Olympic] park, and he seemed very impressed with the ideas that we had. We are working closely with them at lots of different levels and will continue to do so. Brazilians will see it in receptions a year before the games and no doubt there will be pictures in Brazilian newspapers. It is a nice showcase for Britain in that way, but there is a much more detailed working relationship with the Brazilians, because they are taking over the games from us in 2016.35

22. He went on to suggest that the Olympics were one of the key topics of conversation between him and his Brazilian counterparts.36

29 Q 126

30 Q 126


32 Q 127 [Jeremy Browne]

33 Foreign Affairs Committee, Second Report of Session 2010–12, FCO Public Diplomacy: The Olympic and Paralympic Games 2012, HC 581

34 Ev 45, para 8

35 Q 162

36 Q 162


23. As well as diplomatic benefits, our witnesses also identified the commercial opportunities the Olympic Games were bringing to UK businesses. Nicholas Armour of UKTI told us that “the 2016 Rio Olympics, associated with the 2014 World Cup, present a wide range of business opportunities”.37 He added that they had provided an opening for close collaboration between the UK and Brazilian Olympic authorities:

We ... can always have better co-operation, but, given that they are trying to run the Olympics in just over a year’s time, they understand the importance of that and it is a collaboration that works.38

24. Mr Armour suggested that the Olympics would be a major opportunity for UK SMEs to trade with Brazil by acting as part of the supply chain for larger UK firms who have received major contracts.39

25. Jeremy Browne highlighted the opportunity for British firms to sell “soft infrastructure” to the Brazilian authorities: “it is a massive business opportunity in all kinds of areas—project management, design and security. Selling millions of tickets on the internet for example throws up all kinds of issues about cyber-security, banking and distribution systems and pricing mechanisms.”40

26. To promote the UK’s “soft power” in connection with the London Olympics—which bills itself as the “greenest” ever—the FCO has run an “Olympic Sustainability Exchange” to share London’s experience of “embedding sustainability” within the Olympic Games with the organisers of the Rio event.

27. We conclude that the efforts made by the Government to strengthen the UK’s bilateral relationship with Brazil are welcome. We note that the forthcoming London Olympic and Paralympic Games will be invaluable in bringing the UK and Brazil closer together. We further conclude that while the Government’s efforts are to be welcomed, they should be only the beginning. We recommend that the Government view its aspiration to enhance the UK-Brazil relationship as one requiring a long-term commitment to maintain the recent momentum. We will continue to monitor developments in the bilateral relationship throughout this Parliament.

Practical measures which the FCO could take

28. While we are supportive of the efforts that the FCO has already taken to improve and strengthen the bilateral relationship, these labours will take time to bear fruit. During our inquiry we have identified three areas where the Government can act almost immediately to strengthen the relationship. We set these out below:

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Double taxation agreements

29. Double taxation agreements provide certainty of treatment for cross-border economic activity and prevent fiscal discrimination against UK business interests abroad. They aim to protect against the risk of “double taxation” which occurs because of the clashing of domestic laws; for example, some countries assess tax on worldwide income derived by residents, while other countries assess tax on income having a source in their country, similarly more than one country may regard the same taxpayer as resident in their country.41 This type of taxation can raise a barrier to the exchange of goods and services and the movement of capital and persons between countries. Persons will be unwilling to provide capital, goods or services in an overseas country if they are likely to be taxed on the income derived both in that country and in their country of residence.

30. The UK is a signatory to double taxation agreements with over 100 countries and is committed to their promotion elsewhere. Negotiations on a double taxation treaty between the UK and Brazil are ongoing. We have heard informally that the UK is keener on signing such an agreement than Brazil. Despite the benefits to bilateral trade, countries may be averse to signing a double taxation agreement because of national sovereignty considerations or a lack of “mutuality”, a feeling that one party to the agreement may benefit disproportionately.

31. In correspondence with us the Government told us on 15 August that “There are presently no negotiations taking place on a double taxation agreement” and that previous negotiations had failed “owing to the differing treaty policies of the two countries.” However, the UK and Brazil have negotiated a Tax Information Exchange Agreement42 which is due to be signed later this year.43

32. A double taxation agreement between the UK and Brazil would not alter the commercial relationship between the two countries overnight, but it would be of practical assistance to UK companies trading in Brazil and be an important symbolic step in highlighting the importance that the UK Government is placing on the improved trade links. We recommend that the Government continue to lobby hard on this issue during upcoming Ministerial visits and at the annual UK-Brazil Joint Economic and Trade Committee meeting.

Changes to student visa regulations

33. In March 2011, the Home Secretary announced changes to the student visa system, so-called Tier 4 immigration. The changes announced included:

• Stricter sponsorship and accreditation requirements for education providers;

• A certificate of English-language ability at B2 or above from an independent test provider;

41 CCH British tax guide, Wolters Kluwer (UK) Limited; cch.co.uk

42 According to the HMRC website, Tax Information Exchange Agreements are “bilateral agreements under which territories agree to cooperate in tax matters through the exchange of information”.

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• A maximum of three years study below degree level and five years at National Qualifications Framework 6-7 (undergraduate and postgraduate level) with exceptions for those at the higher level doing a PhD, as well as for those courses which require as a matter of professional qualification a longer duration than five years (e.g. medicine, architecture); and

• Students studying with private education providers will be unable to work whilst studying. Students at publicly-funded educational providers will be able to work 20 hours a week if they are at University or 10 hours a week if they are at college.44

The Government acknowledges that these changes will reduce the number of international students studying at UK institutions, but believes that 80% of the places that are not taken up by international students will instead be taken up by UK or EU citizens.45

34. In July 2011, Brazilian President Dilma Rousseff announced the “Science without Frontiers” programme which plans to introduce 75,000 new government-funded university scholarships for Brazilian students to study abroad by 2014.46 During our visit to Brazil, concerns were raised by some of our interlocutors that the proposed changes to UK student visa applications would make it significantly more difficult for Brazilian students to capitalise on President Rousseff’s initiative by studying in the UK. We understand that the Brazilian government itself is concerned about the possible impact of the new UK application process for student visas.

35. Giving evidence to the Home Affairs Committee on 3 March 2011, Jeremy Browne said that changes to the student visa regulations were not a major concern to overseas governments:

[student visas] get raised in the course of conversations. I have to say it was raised more frequently when I first became a Minister in the first month of the Government than it does now [...] I cannot remember it being raised specifically in the last month or two in a general conversation.47

36. Despite these assurances, the Business, Innovation and Skills Committee, in its current inquiry into student visas, have received evidence that the changes have caused considerable reputational damage to the UK in China. Witnesses reported concerns from UK universities and businesses in China about the negative impact of the visa regime and proposed immigration cap on the UK economy.48

37. In a letter of 15 August the Government told us that the UK has been approached by the Brazilian government as a preferred destination for Brazilian students studying abroad as part of the “Science without Frontiers” programme and that the British Embassy in

44 HC Deb, 22 March 2011, cols 855–58

45 “Reform of the Points Based Student (PBS) Immigration System: Impact Assessment”, UK Border Agency, 1 June 2011, page 19

46 See: “In Brazil, a plan to send students to world’s top colleges”, Time Magazine, 21 September 2011.

47 Jeremy Browne MP, Oral Evidence to Home Affairs Committee, 3 March 2011, HC 773, Q 368

48 Business , Innovation and Skills Committee, Eighth Report of Session 2010–12, Trade and Investment: China, HC 1421, paragraph 65


Brasília has held discussions with the Brazilian Ministries for Education and Foreign Affairs on “how such a scheme might work within existing UK migration constraints”. Discussions are ongoing and are centred around “selected Brazilian students spending a period of less than twelve months at a UK institution as part of a wider course of study.” In addition to these discussions, the Embassy and British Council have highlighted this programme as an opportunity for the UK education and private sectors. The Deputy Prime Minister’s visit in June 2011 saw a commitment to “set-up a UK-Brazil implementation group to take forward higher-education co-operation”.49

38. BG Group, which has a large commercial presence in Brazil, has announced that it will fund the UK costs of the first tranche of Brazilian science and technology students to spend one year of their studies at a UK university. This is expected to cover “up to 450 scholarships over the next 4 year period”.50

39. We conclude that the Government’s proposed changes to student visa entry requirements may make it more difficult for Brazilian students to study in the UK, at the very time when the Brazilian government is proposing to increase the number of Brazilians studying aboard. We recommend that the FCO explore with the Home Office what steps can be taken to ensure that the new visa regime does not prevent suitably qualified bona fide Brazilian students from entering the UK to study. We further recommend that, in its response to this Report, the FCO inform us of the outcome of these discussions.

Rio+20 Conference

40. The Rio+20 Conference on Sustainable Development, the so-called “Earth Summit 2012”, aims to build on the United Nations Conference on Environment and Development (UNCED) which was held in Rio de Janeiro in 1992. The summit will be a chance for participants to take stock of developments in the 20 years since the last Rio Conference on sustainable development. It will also allow greater efforts to be made on the reduction of carbon dioxide emissions. Given the importance that the Brazilian populace places on the environment and the concept of sustainable development (see paragraphs 117–118 below), the Brazilian government is keen to achieve a positive, substantial success at this summit, particularly as Rio de Janeiro will again be hosting the conference. Informal conversations during our recent visit confirmed to us the importance that the Brazilian authorities are placing on this conference and their hope that other states will actively engage in the conference and work towards a substantive conclusion. Our colleagues on the Environmental Audit Committee have recently launched an inquiry into the UK’s preparations for the Rio+20 Conference.

41. The Government’s position ahead of the Rio+20 Conference is “still being developed”, with Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs, leading the UK’s preparations. A decision on which other Minister will attend the conference with Mrs Spelman has yet to be made.51

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42. Given the importance that Brazil is placing on a successful outcome to the forthcoming Rio+20 Conference, we conclude that the conference represents a golden opportunity for the UK to show its commitment to a stronger bilateral relationship. We recommend that British Ministers, diplomats and officials should liaise closely with their Brazilian counterparts during the run-up to Rio+20, not only to maximise the chances of a successful outcome to the conference but, as an ancillary benefit, further to enhance UK-Brazil relations. We welcome the work of our colleagues on the Environmental Audit Committee in this area.


3 Brazil as a global power 43. Between 1964 and 1985, Brazil was a military dictatorship. As was frequently the case with such regimes in South America, the dictatorship was aligned with the United States, although the Brazilian-US relationship was not as close as that between the USA and other South American countries. The military dictatorship acquiesced in a peaceful transition to democracy in 1985.

44. Democratic Brazil’s foreign policy over the last 15 years has been shaped by three key figures: President Cardoso (1995–2003), President Lula (2003–11) and his Foreign Minister Celso Amorin (2003–11). Under Presidents Cardoso and Lula, Brazil broadly adopted Western “norms” and values in respect of parliamentary democracy and human rights. Brazil is a party to all major humanitarian law and human rights treaties, without any reservations.52 It is also an active participant in the “Doha round” of trade negotiations and international organisations such as the UN and IMF.

45. The UK’s increased emphasis on relations with Brazil comes after a period of an “activist” Brazilian foreign policy. Under President Lula, Brazil took a more affirmative line on foreign policy. Professor Hurrell described this to us as an “activist, personalist, voluntarist and ambitious foreign policy”.53 Lula’s official aim, in the words of his Foreign Minister Celso Amorin, was to “increase, if only by a margin, the degree of multipolarity in the world” while at the same time achieving “recognition” as a valid global policy power.54 To achieve this, Brazil pursued a “South-South” policy and sought to become the voice of the “global South” or the so-called G77 of poorer countries.55 Under Lula, Brazil opened 33 new embassies, 5 new permanent missions to international organizations (including the International Atomic Energy Agency and the Human Rights Council) and 19 new consulates. Most of the new embassies were to African countries. Brazil currently has more embassies in Africa than the UK.

46. According to the FCO, Brazil is seeking to increase the amount of global multipolarity out of a desire for global institutions better to reflect the global balance of power:

Brazil’s approach to foreign policy is driven by support for multilateralism, a rules-based international system and respect for other countries’ sovereignty. Brazil considers the current multilateral system designed in the developed world’s image and not reflecting the reality of the 21st century. The rise of the G20 has boosted their hopes of reshaping such global institutions. Brazil wants the G20 to be the pre-eminent forum for economic matters beyond the global crisis.

52 http://www.adh-geneva.ch/RULAC/index.php (Geneva Academy of International Humanitarian Law and Human

Rights)

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54 Andrew Hurrell, “What kind of rising state in what kind of institutional order?” Rising States, Rising Institutions, p 9

55 The “G77” was established in 1964 as a caucus of 77 developing countries within the UN. There are currently 131 members of the G77, including some “developed” or “semi-developed” countries, including China, India and Brazil. http://www.g77.org/


Brazil believes it has the right to a place at the senior table, including a permanent seat at the UN Security Council (it is now in the second year of a non-permanent seat).56

The FCO is broadly supportive of Brazil’s rise as a global power, viewing Brazil as a valuable partner diplomatically and one which shares the UK’s core values and aims. Jeremy Browne told us that:

Brazil is quite a good voice internationally in terms of our values. Rather than having the familiar cast list of European countries and North Americans making those points, there is the opportunity for a new voice to make points that we would support.57

Reform of the United Nations Security Council

47. Brazil is currently one of ten non-permanent Members of the UN Security Council. These countries, unlike the five permanent members (China, France, Russia, UK and US—the “P5”), do not possess a right of veto. Brazil’s two-year term of office is due to expire at the end of 2011. According to many commentators, Brazil’s over-riding diplomatic aim is reform of the Security Council, in order to increase its “legitimacy”. This reform would include a permanent UN Security Council seat for Brazil which would act as the voice of the “global South”. The Brazilian Embassy told us that:

Consistent and continuous participation of developing countries as permanent members is vital in order to award legitimacy and efficacy to the Security Council. […] There is an almost unanimous view among Member States that the Security Council must be enlarged in order to both better reflect present political realities and to make the organization more representative, legitimate, efficient and effective.58

Neil Atkinson told us that reform of the UN Security Council was “the ultimate goal of Brazilian diplomatic policy”.59

48. The British Government supports Brazil’s application for permanent membership, as part of a wider reform of the Security Council.60 Jeremy Browne told us that the UK’s commitment to reform is long-standing and that it would prefer to expand the permanent representation to 10, to include Germany, Japan, India and Brazil, together with a major African power. He suggested that such an arrangement may require “two-tier” memberships where some permanent members lack the right of veto currently enjoyed by the P5.61

49. An argument sometimes advanced against a permanent Brazilian presence on the Security Council is that Brazil has not shown itself willing to accept the responsibilities

56 Ev 46, paras 22–23

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attendant upon being a global power: in particular, the duty to play a leadership role in tackling international disputes, and assertively to defend and promote human rights globally. Figures such as Jorge Castaneda, former Mexican Foreign Minister, have stated that Brazil (and fellow “BRICs”, Russia, India and China):

remain attached to the rallying cries of their independence or national liberation struggles: sovereignty, self-determination, non-intervention, autonomous economic development. And today, these notions often contradict the values enshrined in the international order.62

Professor Hurrell told us that this view of Brazil—as a country “unready” to act globally—was particularly prevalent in the US:

I was in New York all last year and heard lots of language accusing Brazil, such as, “Brazil is an adolescent, it hasn’t really learned to grow up, it’s got power but it doesn’t know how to use it”.63

50. We asked our witnesses their opinion on Brazil’s readiness to act as a global power or whether the UK’s open support of Brazil’s claims to a permanent UN Security Council seat was premature. Dr Riethof said that the reality of Brazil’s “non-interventionism” was more nuanced than that articulated by Mr Castaneda and that Brazil does not eschew intervention as a concept. She noted that while Brazil traditionally opposed military interventions, it did support non-military intervention on humanitarian grounds, and that, especially within Latin America, it was heavily involved in conflict mediation. She speculated that Brazil hoped to become a recognised “neutral” global power and play a mediator role at the global levels.64 Dr Riethof acknowledged that “Brazil is involved in conflict mediation through the regional structure of the Union of South American Nations”, but added that “I am not entirely sure whether that translates into a recognition of the responsibilities in the Security Council”.65

51. Professor Hurrell told us that while “Brazil is towards the sovereignty end of the spectrum, [...] there has been quite a lot of movement towards ideas not of non-intervention but of non-indifference about what happens, so there has been movement there”. He also suggested that domestic pressures were forcing a rethink on Brazil’s traditional, “non-interventionist” foreign policy and its place in a reformed global order which included Brazil as an acknowledged “power”:

There is a big debate, though, about what the responsibility of a permanent member actually involves. It clearly involves activities in peace and security. [...]

The role of a broader membership could well be in providing other assets of this mediation kind and other important assets in terms of representation. So I think the Brazilian view would be to press a broader debate about what “the responsibilities” of permanent membership are. [...]

62 Jorge G. Castaneda, “Not Ready for Prime Time”, Foreign Affairs, September/October 2010, pp 112–113

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Is there broad support? Yes, there is much more interest in foreign policy domestically. There is much more support for an active foreign policy. There is much more contestation about things like Brazil’s Iranian policy.66

He also stressed that this internal debate was not yet complete and that Brazil’s traditional doctrine of non-intervention still held sway.67

52. The FCO believes that Brazil is slowly moving towards a less “hands off” stance in its international relations:

President Rousseff has changed Brazilian policy on human rights, as evidenced by the Brazilian vote in favour of a Special Rapporteur on Human Rights for Iran in March 2011.68

53. Brazil’s leadership of the UN peacekeeping operation to Haiti (MINSUTAH) has been interpreted by some as a sign that it is more ready to accept a global “leadership” role. Brazil currently contributes around 2,200 troops to UN missions, chiefly to Haiti. In addition, Brazil contributes to the UN naval mission off the coast of Lebanon.

Brazil’s positions on Iran and Libya

54. Brazil’s recent foreign policy actions with regards to Iran and Libya provided us with a useful case study of the country’s role as an international actor.

55. President Lula was widely criticised for the closeness of his links with President Ahmadinejad of Iran. Towards the end of Lula’s second term as President, Brazil and Turkey attempted to intervene in the ongoing negotiations between Iran and the so-called E3+3 group of countries (the US, Russia, China, UK, France and Germany) over Iran’s nuclear programme. After refusing to support US-led calls for tighter sanctions against Iran, in May 2010 Lula announced that Brazil had persuaded Iran to send its uranium abroad for enrichment (echoing an earlier suggestion put forward by the US). The initiative was dismissed by the US government. Media commentators roundly criticised Lula’s efforts. Newsweek noted that this was part of what they saw as a worrying trend in Lula’s foreign policy:

Rather than using Brazil’s prominence to press outlier regions to respect human rights and comply with international rules on nuclear power, Lula suddenly seems bent on ducking controversy and accommodating demagogues. He routinely trades bear hugs with Hugo Chavez [and] Brasília’s diplomats abstained on a vote “deploring the grave, widespread and systemic human-rights abuses” in North Korea.69

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69 Mac Margolis, “Rogue Diplomacy”, Newsweek, 7 May 2010


56. Lula was further criticised for defending Ahmadinejad’s “democratic” victory in the disputed 2009 Presidential election, and speaking out for Iran’s right to enrich uranium for nuclear energy and downplaying warnings that Iran is developing nuclear weapons.70

57. Brazil’s foreign policy doctrine, which is based around the concept of “national sovereignty”, was further tested during the recent UN votes on UN Security Council Resolutions 1970 and 1973, both of which called for action against Libya. Brazil abstained on the votes on both Resolutions. Speaking following the adoption of UNSCR 1973, Brazil’s representative to the UN said that:

Brazil’s abstention should not be interpreted as an endorsement of the ruling regime in Libya, but the text of the resolution before us contemplates measures that go much beyond [the prevention of violence] call. We are not convinced that the use of force as contemplated in the present resolution will lead to the realisation of our most important objective—the immediate end of violence and the protection of civilians”71

58. This position has been interpreted by some commentators as a sign that Brazil remains unready to act as a responsible global power. According to the Financial Times it is an indication that “an expanded council would strengthen the hand of the non-interventionists and weaken that of the West”.72

59. We asked Professor Hurrell and Dr Riethof how Brazil’s actions on Iran and Libya should be interpreted. Professor Hurrell told us that Brazil’s attempted initiative on the Iran nuclear programme fitted Brazil’s foreign policy narrative and its belief that the country has an important, “alternative” role to play in global affairs:

Even in some of the, what you term, “controversial” policies—the idea that Brazil [...] has a role in helping to manage and mitigate some of the more obvious deep-rooted regional problems that everyone recognises and some of the problems that others, particularly the US, recognise, say in relation to Cuba and Venezuela—its policy is clearly seen as part of a narrative about what Brazil can do. That is not about the great, grand provisions of some new global order, but important provisions of active diplomacy and responsibility in its region.73

Professor Hurrell also noted that Lula’s engagement with the Iranian regime was not unanimously supported in his own country and should not automatically lead to conclusions about Brazil’s wider foreign policy:

Interestingly, of course, Lula’s policy generated this enormous debate and controversy inside Brazil about whether it was a good thing or a bad thing—relations with Washington, human rights, and all of that.74

70 See: “Lula defends Ahmadinejad’s Nuclear Goal, Plans Visit to Iran”, Bloomberg, 23 September 2011, and

“Ahmadinejad in Brazil: Why Lula defies the US”, Time Magazine, 25 November 2011.

71 Maria Luisa Viotti, Speech following adoption of UN Resolution 1973, http://www.brasil.gov.br/news/history/2011/03/18/adoption-of-united-nations-security-council-resolution-1973-on-libya/newsitem_view?set_language=en

72 “BRIC abstentions point to bigger UN battle”, Financial Times, 18 March 2011

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60. Dr Riethof suggested that Brazil’s position on Libya stems from “Brazil’s traditional rejection of intervention along the lines that were proposed in the resolution”.75 Dr Riethof agreed with Professor Hurrell that many of Brazil’s recent foreign policy actions stemmed from a desire to be seen as an “alternative” global power.

61. Notwithstanding the various criticisms which have been made of Brazil’s foreign policy stance, Jeremy Browne told us that he remained confident that Brazil’s values were similar to those of the UK, and that Brazil had abstained in the vote on UNSCR 1973, not because of deep-rooted antipathy towards military intervention, but because “Brazil [was] not fully persuaded. If it was, it would not have abstained.”76 Mr Browne went on to say that “there are a handful of countries in Latin America that we really struggle to see eye to eye with on these matters. Brazil is definitely not one of those.”77 He further speculated that Brazil’s, to some Western eyes, ‘difficult’ positions on global matters could be attributed to the fact that it was still in a state of transition towards a fully evolved foreign policy which took account of its increased stature in the world:

the [South American] continent as a whole, inasmuch as one can generalise, has moved massively in the right direction, as we would see it, over an accelerated period of time. Different countries are at different steps in the process of how they respond to those movements, consolidate them and analyse them.78

62. Mr Browne agreed with Professor Hurrell and Dr Riethof that Brazil was currently engaged in an internal debate over its role as a global power:

there is a debate to be had [...] which was that there are times when you do need to intervene to safeguard or advance our values. There are other countries that are not completely hostile to that idea, but would prefer somehow to try to reconcile those two, even when it is a struggle to do so. From observing, Brazil is in that position.79

Mr Lapsley noted that while “many Latin American countries are uncomfortable with hard-edged intervention”, there was a role for Brazil in promoting its “soft power” and acting as an exemplar to others:

One of the things that we have been talking to Brazil about is the way that it, as a model for economic and political transition, in common with many other Latin American countries, has an awful lot to offer the Arab world as it goes through its own political and economic transition. Perhaps it is in that kind of way that those countries can most helpfully get involved.80

63. Mr Browne further stated his support for Brazil as a global actor and expressed his approval of recent changes in Brazil’s foreign policy under President Rousseff:

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I do not want us to feel that it is only countries like the United Kingdom, France and the United States that are allowed to have a global view and that somehow the Brazilians should not be thinking beyond their own continent. It is entirely legitimate for them to have that wider role, but it is how they choose to exercise that wider role. My view is that the choice they took a few years ago was not wise. Voting on the Special Rapporteur on Human Rights was the right way to go and the best decision that they could have made. I hope that that is indicative of Brazil using its global role in ways that are more compatible with our objectives in the future.

These comments by Mr Browne echoed the proposal by Dr Riethof that the UK should openly welcome Brazil’s rise. She told us that the UK should:

recognise Brazil’s various foreign policy roles and various formats and regions and to use that also to support a Brazilian role at a global level, even if that does not immediately translate into a permanent seat at the Security Council. As you probably know, US support for Brazil as a permanent member has not been expressed openly, and China is apparently also not necessarily supporting a Brazilian bid, so some support may be useful for a Brazilian campaign in that direction.81

64. We conclude that the UK’s explicit support for Brazil’s permanent membership of the UN Security Council, as part of wider UN reform, is to be welcomed. We believe that Brazil has a potentially valuable role to play on the global stage, drawing upon the prestige and legitimacy conferred by its rising economy, its commitment to democracy, and its status and experience as a member of the developing “South”. We recommend that the Government should continue to seek to act in close partnership with Brazil at the UN and in other international fora, and should encourage Brazil increasingly to take on the responsibilities associated with being a major global power. In this context we welcome the recent development of Brazilian foreign policy under President Dilma Rousseff, particularly with regards to the promotion of human rights in other countries.

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4 The Falkland Islands 65. In January 2011, HMS Clyde, a Royal Navy patrol vessel based in the Falkland Islands, was refused permission to dock in Rio de Janeiro. This was the first time that a Royal Navy vessel had been refused such permission. It has been suggested that the refusal was ordered by the Brazilian government to show solidarity with Argentina in order to improve relations between Brazil and its largest neighbour. It was further suggested that this decision by the Brazilian government was linked to an official visit by President Rousseff to her Argentinean counterpart which occurred in the same month as the refusal of the Clyde. Brazil formally supports Argentina’s claims to the Falkland Islands, however, the UK Government argues that the recent signing of a defence agreement between the UK and Brazil is a sign of Brazil’s commitment to a continuing close defence relationship with the UK.82 The FCO states that the Government had “expressed its disappointment” over the HMS Clyde incident and is “discussing with Brazil how to handle these visits in the future”.83

66. Professor Hurrell speculated that Brazil’s increasing emphasis on regional integration had helped shape Brazil’s evolving position on the Falklands which was likely to become increasingly supportive of Argentina’s stance:

It has become a central part of Brazilian foreign policy, so not doing anything that would be dramatically out of step with the region, or that would interfere with its regional policy, seems to be something on which one can bank quite heavily as a major factor that influences what Brazil does and doesn’t do in relation to the Falklands/Malvinas.84

Neither Professor Hurrell nor Dr Riethof thought that the refusal of permission for HMS Clyde to dock represented a fundamental shift in Brazil’s position over the Falklands; instead they both felt that the problem was “political” rather than military.85

67. On 23 June 2011 we wrote to the Foreign Secretary requesting more information on the HMS Clyde incident and what measures had been put in place to ensure that Royal Navy ships were not refused permission to dock in future. The Government’s response, which we received on 4 July, stated that the UK’s position on the Falkland Islands is “clear and longstanding”.86 We were told that Brazil is aware of the UK’s position that “the Falkland Islanders’ right to determine their own political future is paramount” and the UK is “not prepared to discuss the sovereignty of the Falkland Islands against the wishes of the Falklands people”. The Government stressed to us that they “are not shy about this issue with Brazil” but preferred to do so in private, away from “the full glare of media and public scrutiny”. Accordingly we were surprised when the Deputy Prime Minister chose to discuss it 'in the full glare of the media' on his recent visit to Brazil.

82 See: “Royal Navy’s Falklands ship turned away by Brazil”, The Daily Telegraph, 10 January 2011.

83 Ev 47, para 32

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68. In a separate letter sent in July, the Foreign Secretary gave us more information about the original incident. He stated that HMS Clyde planned to make a routine stop in Rio de Janeiro, “but did not get diplomatic clearance to do so”. The Government told us that they are “very disappointed by this development” and aimed to “find a way forward which meets Brazil’s concerns whilst preserving, and indeed enhancing, the defence relationship between our two countries”.87 A letter of 2 August confirmed that this issue was raised with the Brazilian Defence Minister, Nelson Jobim, during his visit to the UK on 5–7 July. This letter also suggested that the Brazilian government “understand[s]” the UK’s position.88

69. On 24 August we requested information from the FCO in light of recent news events suggesting that Brazil had adopted a stronger position towards Falklands-flagged ships and, in common with Argentina and in accordance with a UNASUR resolution, was refusing docking rights to ships flying the flags of the Falklands. President Dilma reportedly justified this decision by saying that ships flying the colours of the Falklands were doing so “illegally”.89 In their reply to our request, the FCO stated that:

it is important to note that the November 2010 UNASUR language on Falklands-flagged shipping to which the article refers is caveated with the need to adhere to “international law and respective domestic legislation”. Accordingly, we do not expect Falklands or UK-flagged commercial vessels to be refused entry into South American ports, despite pressure from Argentina.

The FCO reiterated that the UK’s position towards the Falklands “is well-known ... to our partners in South America, including Brazil.”90

70. The turning away of a Royal Naval vessel is a serious matter. We regret that the Brazilian government felt it necessary to take such action. While we accept the UK Government’s position that they would prefer to discuss such matters in private and “away from the full glare of media and public scrutiny”, we note with disappointment their reticence on this matter in correspondence with us.

71. While we are confident that the FCO has in place procedures to prevent a recurrence of this unfortunate development, we have yet to be told precisely why diplomatic clearance was refused for HMS Clyde, however we note that the scheduled arrival of the Clyde clashed with a meeting between the Brazil and Argentinean Presidents. We recommend that, in response to this Report the FCO tell us exactly why clearance was refused and what procedures are now in place, including a guarantee that in future such applications are overseen by a diplomat of an appropriate level of seniority in order to mitigate against such failings in future.

87 Ev 69

88 Letter from the Foreign Secretary to Richard Ottaway MP, Chair, Foreign Affairs Committee, dated 2 August 2011 (BRZ 15) [not printed]

89 “Brazil blockade hits Falklands oil hopes”, The Sunday Times, 21 August 2011

90 Ev 71


5 Commercial relations between the UK and Brazil 72. The FCO envisages the proposed stronger bilateral relationship with Brazil as incorporating a much closer trading relationship. In his November 2010 Canning Lecture, the Foreign Secretary referred to Latin America as a growing economic powerhouse. Jeremy Browne noted that Brazil is the “seventh largest economy in the world, and it will shortly be the fifth largest”. He suggested that this economic growth would encourage a greater degree of bilateral trade: “in economic terms [...] Brazil is getting into territory where what the British economy offers, in terms of services or hi-tech manufacturing, is very compatible with the next phase of Brazilian economic development”.91 The FCO’s written submission states that “a growing [Brazilian] middle class provides a potential market for goods and services the UK can offer. Brazil weathered the global economic crisis better than Europe and North America”.92 Nicholas Armour of UKTI commented that:

Brazil is a developed nation. It has huge middle-class and consumer purchasing power that is probably larger than in the United Kingdom. We jolly well ought to be selling into that, at least at the levels that we export to the rest of the world.93

Given these advantages, the FCO aims to double annual UK exports [to Brazil] from £2 billion to £4 billion by 2015, that is, increase it to a level roughly equivalent to the UK’s current trade with Sweden or Switzerland.94

73. Mr Armour told us that the UK’s competitors were already active in the market and that the UK’s renewed interest in Brazil was somewhat overdue:

If our normal global trading rivals are doing successful business there, we should be doing so, too [....] We are saying not that you must go here because it will last, but here is something that your competitors are taking advantage of and perhaps you ought to be too, particularly as markets elsewhere are somewhat flat.95

74. Despite the UK’s relatively late acknowledgement of the opportunity Brazil brings, there are some signs that progress towards the FCO’s aims is being made. UKTI has told us that over the past three years, inquiries from UK companies have increased by 500%, while exports to Brazil in 2010 saw an increase of 23% over the previous year.96

75. To help achieve the overall objective of doubling UK exports (an objective the Government has also set for trade with India, Kuwait, Qatar, South Africa and Turkey), a variety of measures have been introduced, including the establishment of a UK-Brazil Joint

91 Q 125

92 Ev 45, para 12

93 Q 67

94 UK export and import in 2009, HM Revenue and Customs

95 Q 77

96 Ev 45, para 14


Economic and Trade Committee (JETCO) and a UK-Brazil CEO [Chief Executive Officer] Forum, an increased number of Ministerial visits, and greater diplomatic and UKTI representation in-country (for which, see paragraph 19 above).

JETCO and the CEO Forum

76. Formed in 2006, the JETCO was set up “to promote and develop trade, to address barriers to trade and to create a better business climate”. It was the first formal mechanism set up to remove barriers to trade between the UK and Brazil.97 In 2007, the House of Commons Trade and Industry Committee welcomed the creation of the JETCO but noted “that its success will depend on maintaining both political and business interest and involvement in both countries”.98 The JETCO has generally been viewed as a success. In November 2008, the then Secretary of State for Business, Enterprise and Regulatory Reform, Rt Hon John Hutton MP, said that as a result of the JETCO, “senior representatives from public sectors, business people from major UK and Brazilian companies and leading business bodies have been sharing learning and experience to create a better environment for our two countries to do business together.”99

77. Nicholas Armour highlighted the value of the JETCO as a regular forum for discussing barriers to trade:

we have regular opportunities to speak to the Brazilians, whether in the course of normal business through the ambassadors or on business with Ministers or JETCO. We may say, “You do realise that this particular issue is counter to your undertakings with WTO or whatever it is. You do realise that you are holding up British interests in doing business in your country; you say you want it”—and this, that and the other100

78. In August 2010 the new Government announced the creation of the Brazil-UK CEO Forum. This will bring together business representatives of “priority sectors” to discuss “practical advice on the issues and opportunities to be addressed as part of an enhanced bilateral partnership”. When asked about the Brazil-UK CEO Forum, Mr Lapsley said that the forum is an opportunity for business leaders to discuss ways in which the barriers to trade could be reduced.101

UK commercial presence in Brazil

79. Of the UK Posts in Brazil, the consulate in São Paulo is particularly focused on commercial matters; although there are also small commercial offices in Recife and Porto Alegre (the post in Recife will be “upgraded” to a Consulate-General).102 There are plans to

97 http://www.ukti.gov.uk/export/countries/americas/southamerica/brazil/item/108425.html

98 Trade and Industry Committee, Seventh Report of Session 2006–07, Trade with Brazil and Mercosur, HC 208, para 87

99 John Hutton Speech to Brazilian Chambers of Commerce, 28 November 2008, Dorchester Hotel http://brazilianchamber.org.uk/sites/default/files/publications/brazilbusinessbrief08.pdf

100 Q 84

101 Q 161

102 Ev 45, para 7 and HC Deb, 11 May 2011, cols 1166–67


increase the UK’s commercial presence in Brazil. Angus Lapsley told us that UKTI is “looking at” its allocation of resources to its presence in Brazilian operations.103 Nicholas Armour was confident that the UKTI staff based in Brazil were fully integrated into the FCO network and “almost all of them” spoke fluent Portuguese. Most of UKTI’s staff in Brazil are locally engaged Brazilians; those at senior director level, while British, are often married to Brazilians.104

80. UKTI highlighted a changed approach to their work in Brazil. Mr Armour called this a “project-focused approach”. Mr Armour complained that too often British exporters and UKTI had relied on a laissez-faire approach and had not pooled their resources in a structured manner. The aim of the new approach was to be:

a little more organised, particularly in the way that companies call on our services in-country [...] We are trying to give that sort of steer to companies looking to win business so that it becomes more coherent.

81. Mr Armour told us that “the Brazilians tell us that they would much prefer that approach, rather than a whole host of people all trying to call on a few key officials in an unstructured way”. This type of work has already begun on direct knowledge transfer around the Olympics with “clusters” of firms currently supplying the 2012 Olympics being brought together by UKTI.

82. CityUK are generally supportive of the work and performance of the UKTI operation in Brazil:

there are good links between the CityUK (and its practitioners) and the UKTI teams in Brazil and London. There are regular visits, exchanges of views, and two-way contacts to see how best UKTI can support UK companies in the sector. [...] The Posts in Brazil understand the importance of the financial and related services sector as a facilitator of business across other sectors. We acknowledge the significant expansion in UKTI activities both in market and in the UK in recent years to advise UK companies of the opportunities in Brazil, as demonstrated by the increased number of companies visiting the country.105

83. Since the General Election, the Business Secretary (Rt Hon Vince Cable MP), the Minister of State at the FCO (Jeremy Browne MP), the Prime Minister’s Special Adviser on Trade (Rt Hon Lord Brittan), and the Lord Mayor of London (Rt Hon Alderman Michael Bear), have all visited Brazil. In June 2011, a delegation comprising the Deputy Prime Minister (Rt Hon Nick Clegg MP), the Culture Secretary (Rt Hon Jeremy Hunt MP), the Universities Minister (Rt Hon David Willetts MP) and the Trade and Investment Minister (Lord Green of Hurstpierpoint) visited Brazil accompanied by the heads of 20 leading British firms.

103 Q 161

104 Q 73–74

105 Ev 63, para 6


84. Nicholas Armour said that these visits were a sign of the UK’s efforts to promote a commercial relationship and, unlike previous efforts, the Government was determined to maintain this programme:

traditionally Latin America has been under-visited by significant Britons. If you will allow me a slight moment of cynicism, normally a Prime Minister will go and declare Latin America to be discovered and then that is the last time they can go. That happens for very understandable reasons—it is quite a long way away. The fact that we have had a fairly sustained programme of ministerial and high-level visits ... shows that there is a growing commitment.106

85. The FCO fund some of UKTI’s work in Brazil via the Commercial Diplomacy Fund.107

Barriers to trade

86. According to the FCO’s Director, Americas, Angus Lapsley, British firms need to have an established presence in Brazil and be prepared to plan for the long-term:

The British companies that do well in Brazil—HSBC, BG [British Gas group] and so on—have been at it for a long time, and have built up relationships. It is not like America where you can pitch up with a good idea and do business. You really have to work the Brazilian system.”108

Informal conversations that we held with businessmen in Brazil confirmed this opinion.

87. The Brazilian business culture is very different from that of the UK. It is sometimes argued that Brazil is a difficult country to do business in. According to data collected by the World Bank, Brazil is ranked 127 out of 183 economies for the “Ease of doing business”.109 We have heard anecdotally that there are 5,000 accountancy regulations in Brazil and that their application is somewhat random. The Economist recently cited labour laws which prohibit redundancies “without due cause” and noted that alcoholism and repeated absence did not constitute “just cause”.110 In addition, corruption is a continuing problem. According to Transparency International, Brazil is the 69th most corrupt country in the world (equally placed with Montenegro and Romania). The Economist has noted a series of political scandals involving bribery and “cash for votes”. On 7 July, a Minister in the Department of Transport resigned after allegations of corruption in the award of contracts.111 According to Nicholas Armour, corruption is a serious and “difficult” issue.112 Angus Lapsley said that:

106 Q 67

107 Q 88

108 Q 161

109 International Finance Corporation and the World Bank, Doing Business in Brazil, http://www.doingbusiness.org/data/exploreeconomies/brazil/

110 “Brazil’s labour laws: Employer, beware”, The Economist, 11 March 2011

111 “Corruption in Brazil: The Money Trail”, The Economist, 25 February 2010; “Brazil’s Transport Minister quits in corruption scandal”, BBC News, 7 July 2011

112 Q 93


Going back to what the Minister said earlier about Brazil scoring badly as a place to do business, a lot of that is to do with the fact that it’s a place where it takes time to build relationships, to get round the bureaucracy, and to work out the best way of working through local culture. I think we will work on that over a long period to get results.113

88. During our recent visit we were told that, in addition to the structural problems of bureaucracy and corruption, Brazilian companies were increasingly nationalistic and Portuguese-speaking, especially at higher levels. One interlocutor told us bluntly that British firms needed to speak Portuguese (or hire Portuguese-speaking staff) to be successful. We were also told that the standard of English-language teaching in Brazilian state schools was exceedingly low.

89. We conclude that the Government is right to point to the rich opportunities available for British companies willing to develop their trading links with Brazil. The Government target of doubling trade over the next five years is clearly an arbitrary one, as evidenced by the fact that the same target has been picked for increasing UK trade with five other major countries. It is, in effect, simply an indication of intent to use the influence of government to maximise trade opportunities for British companies over this period. We welcome the steps taken by both the previous and the present Government to encourage trade, including the setting up of JETCO and the Brazil-UK CEO Forum. We hope the JETCO will prove a useful forum by which best practice on reducing corruption may be shared with Brazilian businesses.

90. We recommend that the Government, via UKTI, continue to invest in providing advice to prospective exporters to Brazil, concerning how best to penetrate the Brazilian market, recognising in particular the need for companies to maintain a strong local presence, to retain adequate numbers of Portuguese-speaking staff, and to have the expertise on hand to navigate Brazilian bureaucracy and commercial law.

EU-Mercosur Free Trade Agreement

91. Negotiations began on a free trade agreement (FTA) between the EU and Mercosur (the free trade zone comprising Brazil, Argentina, Uruguay and Paraguay) in 1999. Talks were suspended in 2004 and restarted in June 2010. The importance of this agreement was highlighted by Philip Brown of the Department for Business, Innovation and Skills (BIS), who commented that:

no major developed country, including the US, has an ambitious trade agreement with the Mercosur area. So, this is one of the few times where this will give the EU truly preferential access to what is quite a closed market. If we can get this one moving, we can get a head start on others there.114

92. Mr Brown gave us an update on negotiations. He told us that they are not “moving forward that quickly” and that the target deadline for completion was almost certain to be missed:

113 Q 161

114 Q 72


the European Commission had an aspiration on concluding the Round this year, which will simply not happen. Realistically, the end of next year will see a good outcome in concluding the round. Once we have a deal that is concluded, we then typically have about another 18 months before the various procedures are gone through and come into force. On that basis, I guess that we would be looking at 2014 as a realistic deadline.115

93. We asked Mr Brown to summarise the benefits of the FTA to the UK economy and why the negotiations had been delayed. He told us that the negotiations were centred on a trade-off between the EU’s protectionist agricultural sector and Mercosur’s protectionist industrial sector. He suggested that protectionism for the industrial sector was particularly prevalent in Brazil.116 Nicholas Armour told us that:

Part of the reason why I think it has been quite difficult to get the FTA sorted out is that they are very worried about what happens if China is able to flood the Brazilian market with their cheaper industrial goods and so on.117

94. From a UK perspective it is anticipated that the “process” side of the agricultural sector, pharmaceuticals and the service sector would benefit most from the agreement.118 Mr Brown stressed that the UK was keen on the agreement being completed:

Our starting point for free trade agreements as the UK is that we generally have an approach to open markets and we see the benefits of both exports and imports. I guess that that is the fundamental starting point. Our overall view of what we want to achieve from our side would be, quite simply, maximum liberalisation possible as quickly as possible.119

95. We conclude that the potential inherent in a free trade agreement between the EU and Mercosur is immense. While we acknowledge the difficulties which exist in the negotiations, we urge the FCO to continue to work towards securing an agreement which will give EU firms a large advantage in a huge market. We recommend that, in its response to this Report, the FCO provide us with an update on negotiations.

The energy sector

96. A particular area of commercial interest for British firms is in Brazil’s rapidly growing oil and gas sectors. Recent discoveries by the semi-private Brazilian firm Petrobras in the so-called “sub-salt”120 fields have led to speculation that Brazil now holds the sixth largest oil and gas reserves in the world. The extraction of oil from the sub-salt fields will be a massive technical challenge. Gisele Araujo of Nabas Legal International drew our attention to the:

115 Q 72

116 Q 68

117 Q 82

118 Q 70ff

119 Q 76

120 The “sub-salt” fields are found under the ocean floor, underneath a thick (approx. 2 kilometres) layer of salt.


huge risks arising from pressure and temperature conditions never before experienced, corrosion of equipment, can pose a true technological and scientific challenge and a high hazard to workers or even tragedies like the leak in the Gulf of Mexico. Finding oil in entirely new conditions, overcoming the thick layer of salt, requires the development of new technologies for extraction.121

97. In addition to the technical challenges, concerns have been raised over the Brazilian government’s economic policies in relation to the extraction of oil from the fields. Petrobras have been designated the sole operator in the field and must make up 30% of any consortium, and most goods and services needed for the extraction must be sourced within Brazil.

98. We asked our witnesses about these developments and their implications for UK investment. Paul Domjan told us that the recent decisions by the Brazilian government made sense and were not an impediment to UK investment:

Brazil has recently changed its regulatory environment to make Petrobras the designated operator, which has been greeted with some disdain in the UK. However, there are some good reasons why the Brazilians want to do that. That is not necessarily an impediment to UK investment—it does not prevent it. Petrobras will still need financing and technical support. It will still need to rent vessels, and it will need engineering and a whole range of other services, [...] so there’s still a lot of scope for the UK to play a part in this.122

99. Mr Domjan went on to say that opportunities for UK firms existed in the manufacture and maintenance of oil-drilling equipment:

The Brazilian market will need to build literally dozens—perhaps as many as 100—of new drill ships, staff those ships with engineers and hire contractors to do all that work. A lot of those contractors will be UK-based, from Aberdeen.123

Mr Atkinson agreed, calling Brazil a “favourable environment and a great opportunity” which UK companies should be “all over like a rash”. Mr Domjan suggested that as well as the manufacture and maintenance of oil-drilling equipment, the City of London would be a key source of finance.124

100. Our witnesses went on to suggest that, if UK companies wished to take advantage of these opportunities, they must enter the Brazilian markets as “co-operators, joint operators, or as technical operators on part of the project”.125 If this is to happen, UK companies need to show their Brazilian counterparts that “they can actually be partners with Brazilian firms, that they can develop Brazilian expertise, train Brazilian engineers, and develop an industry in Brazil that is world class”.126 Mr Domjan stressed that “the

121 Ev 61, para 39

122 Q 8–9

123 Q 8

124 Q 8

125 Q 9

126 Q 10


degree to which the aims of the Brazilian government are supported will be crucial to success”.127

101. Given the need for UK businesses to enter the Brazilian market as a “partner”, our witnesses identified important roles for the UK Government. Mr Domjan said that:

The real opportunity that I want to focus on—it is important for determining the course that Brazil takes, as well—is for the UK to work with Brazil to encourage it to set up a framework for managing all of its revenue. Such a framework would usually include establishing some sort of sovereign wealth fund and rules for how the revenue will be used—when it can come on to the budget, when it needs to be saved overseas and doing that to prevent foreign currency appreciation. That would benefit the UK directly because some of that money would come here to the City of London.

Mr Domjan expressed concern that “There is a real role for the UKTI that I personally think it does not fully appreciate in promoting the City of London as a source for saving oil revenue”. He went on to say that the FCO had a role in educating UK companies that local content regulations, which require a majority of parts and services required to extract the oil to be sourced from Brazil-based companies, were not necessarily a threat but an opportunity to benefit in a technical boom in Rio de Janeiro, the centre of Brazil’s energy industry:

We can even take that one step further, which is that UK companies—I started my career at one of them—often see local content as an obstacle. They expect HMG, the FCO, BERR [the former Department for Business, Enterprise and Regulatory Reform, now BIS] and UKTI and everybody to be fighting against local content requirements, but local content requirements are a very reasonable thing. [...]

There is a real role for the British Government institutions, particularly for UKTI, BERR and the FCO, to help companies understand that Brazil’s local content requirements are not something to fight against, that opposing them isn’t a core part of UK foreign policy in Brazil—that, in fact, they are an opportunity for UK companies. [...]

It is notable that when Pemex was developing its policy for opening and reorganising the Mexican oil industry last year, it looked to São Paulo and not to Houston or Aberdeen as a source of expertise. UK companies in São Paulo would be participating in that, and that is an opportunity that you—the UK Government as an institution—need to help UK companies to see more clearly.128

102. During our visit to Brazil we were told that two British firms in particular had received, or were about to receive, large contracts for work in Brazil, namely British Gas Group (BG) and Rolls-Royce. As can be seen in paragraph 86, Mr Lapsley of the FCO has already acknowledged the success of BG Group in Brazil which operates in partnership with the semi-private Brazilian oil firm, Petrobras. BG has been present in Brazil since 1994 and has invested $5 billion in the country with plans to invest “a further $30 billion … over

127 Q 11

128 Q 21 [Paul Domjan]


the next decade”.129 BG Group is the official partner of Petrobras in exploration and production activities in the pre-salt fields. Some estimates place BG's net share of the pre-salt oil at 2.8 billion barrels of oil with expectations to produce at the rate of more than half a million barrels per day.130 BG’s operations in Brazil were cited as a prime cause behind a recent increase in profits for the overall group.131 While we were in Brazil we were told that Rolls-Royce were close to signing major deals to provide parts for the sub-salt fields. On 15 June it was announced that Rolls-Royce had won the contract to supply two offshore vessels worth £15 million to the oil industry.132 Separately, on 20 June Brazil's TAM airlines signed a deal worth £1.3 billion to purchase Rolls-Royce engines for its fleet.133

103. We note that some larger UK firms, notably BG Group and Rolls-Royce, have had some successes in penetrating the growing Brazilian energy market. We congratulate them on this success and hope that this is a precursor to further trade by UK firms. The role of UKTI in promoting the Brazilian energy sector as an opportunity for UK investment will be crucial. We recommend that in its response to this Report the FCO inform us of UKTI’s work in Brazil, with a particular emphasis on the energy sector.

129 Ev 67, para 2

130 “BG Group doubles estimate of Brazil Santos Basin oil reserves”, The Daily Telegraph, 30 June 2011

131 See, “Higher gas prices and Brazil boost BG Group”, The Evening Standard, 27 July 2011.

132 http://www.rolls-royce.com/marine/news/2011/110615_supply_vessel.jsp

133 “Rolls-Royce wins £1.3bn deal with Brazil's TAM airlines”, BBC News, 20 June 2011


6 Security and criminality 104. Brazil is an increasingly important transit route for drug trafficking into Western Europe. Europol have identified that approximately 250 metric tonnes of cocaine (between 25 and 30% of global cocaine production) enters European markets annually from Latin America. Drugs intended for Europe mainly depart Latin America via Venezuela through the Caribbean or via the eastern coast of Brazil. Brazil is also a growing consumer of cocaine. According to the CIA, it is the second largest consumer of cocaine in the world.134 The rising importance of Brazil as a cocaine “hub” has encouraged the emergence and presence of international organised crime gangs.

105. The UK is supporting Brazilian efforts to tackle the trade in cocaine and other illicit narcotics within Brazil. The Serious Organised Crime Agency (SOCA) has identified Brazil as one of “seven priority countries for the UK’s counter narcotics work in Latin America.”135 The FCO claim that “Interagency operational co-operation between SOCA and its Brazilian counterparts has proved crucial in disrupting cocaine routes”. We asked Mark Bishop, Head of Strategy, Co-ordination and Development at the International Department, SOCA, about his agency’s work in Brazil. Mr Bishop explained that the importance of Brazil as a cocaine transit hub was linked to a problem of geography. While Brazil was not a significant drug producer:

it shares borders with key cocaine-producing countries. The 40 large container ports on its coast have contributed to it becoming a major transit route for cocaine from South America to mainland Europe and Africa [...] There is some evidence of commercial consignments going directly to the UK, but primarily, the key nexus points are from Brazil into Europe and Brazil into West Africa, which in turn relates to indirect supply on to the UK from there.136

106. SOCA has a long-term relationship with the Brazilian authorities. According to Mr Bishop, SOCA has been present (in various guises) in Brazil for “the best part of twenty years”. The agency has two offices in Brazil and 16 employees based in the wider region.137 A large degree of SOCA’s work is capacity-building through the provision of training courses. Efforts are being made to co-ordinate work with other European agencies present in Brazil such as the German Bundeskriminalamt and the Spanish national police.138 Mr Bishop also claimed that the relatively few resources allocated to the SOCA operation in Brazil inhibited some of the work which could be undertaken and forced SOCA to focus its efforts more on specialist training and “specific smaller projects, rather than some of the bigger plans”.139

134 “Central Intelligence Agency World Factbook”, https://www.cia.gov/library/publications/the-world-

factbook/fields/2086.html

135 Ev 46, para 27

136 Q 22

137 Q 34, Ev 53 (SOCA Supplementary Evidence)

138 Q 34, Q 44

139 Q 43


107. Mr Bishop also told us that Brazil was increasingly important as a regional leader on anti-narcotic measures and was a “proxy” for the USA and UK in countries such as Bolivia where American and British agents have been expelled:

Certainly, as the Brazilian internal cocaine problem mounts up or increases, a lot of the Brazilian federal police’s focus has gone towards that. As part of that focus, they realise that they must engage upstream with their partners, which are Bolivia, Colombia, Venezuela—a transit country to a certain extent—and Peru.140

Given that the transit route for drugs exported from Brazil to Europe is via West Africa, SOCA also noted greater efforts from the Brazilian authorities to operate in West Africa, particularly in Portuguese-speaking countries. SOCA is encouraging these efforts:

We are looking to encourage them—through things such as EU projects, SEACOP, Ameripol141 and others that I can go into in more depth—to get much more involved in Africa, primarily through the Portuguese-speaking countries. [...]

There’s an organisation called the Comunidade dos Países de Língua Portuguesa which is the mechanism largely by which Brazil shifts aid, and there’s about $4 billion of it every year to Africa. We think that there is scope for that to be much more involved in issues that really affect Africa, such as drug trafficking. In that CPLP, you have Guinea-Bissau, Equatorial Guinea, which is an observer, Angola, Senegal, which is also an observer, Cape Verde, Mozambique, Brazil and Portugal. They are all key areas for us when it comes to tackling class A drugs.142

108. During our visit, we were made aware of Brazil’s increasingly active regional role in combating the drugs trade. We were told that Brazil is introducing a regional anti-narcotics plan with the aim of co-ordinating national responses in the region.

109. We are pleased to note SOCA’s long-term presence and continuing work in Brazil. We recommend that, given Brazil’s increasing importance as a drug trafficking “hub”, SOCA focus more work and resources in Brazil to prevent the problem escalating further. We conclude that Brazil’s active leadership role in co-ordinating a regional response is a welcome development and is further evidence of Brazil’s increasing capacity to play a leadership role on international issues. We recommend that the FCO should publicly welcome and support this leadership role.

Human rights concerns

110. Despite a generally positive human rights record, many commentators have noted deep-rooted and continuing problems in Brazil’s criminal justice system with respect to human rights and the treatment of children. In April 2011, the US State Department, in its annual review of human rights around the world, described unlawful killings by state police in São Paulo and Rio de Janeiro as being “widespread”. The State Department added that, while prison conditions “ranged from poor to life threatening; some states made

140 Q 30, see also Q 37.

141 American Police Community

142 Q 31–32


efforts to improve conditions. Abuse by prison guards, poor medical care, and severe overcrowding occurred at many facilities.”143 During our visit we heard that the maintenance of human rights, especially in the criminal justice sector, is incomplete. We heard informally that the use of violence against children by state authorities is prevalent—particularly towards suspected “gang members”—and the sexual exploitation of children is becoming more frequent.

111. Brazil benefits from an active civil society. By some estimates over 220,000 NGOs are operative in the country, and during our visit we held a meeting with some leading representatives of the third sector. We were told informally that two problems hinder the full implementation of a truly effective human rights regime. Many of our interlocutors suggested that the difficulty lay not in Brazil’s willingness to abide by international human rights conventions—the Brazilian Constitution enshrines, in its Articles 4 and 5, recognition of civil and political rights, and, as already noted, Brazil is a signatory to all major international human rights treaties and conventions—but their application and recognition by state authorities. While the senior levels of Brazilian government openly supported and encouraged the promotion of human rights domestically, this enthusiasm was not found at other levels of government and education in the role of human rights, particularly in law enforcement, was lacking. We also heard that the work of many Brazilian NGOs is hindered by a lack of philanthropic culture in Brazilian society. As a result many charities and human rights pressure groups are dependent on state funding. This limits how critical they can be of government policies.

112. We were told that the UK could play a role in correcting some of the gravest human rights abuses through insisting on the implementation of the recommendations it made in 2008 as part of the Universal Peer Review process at the UN Human Rights Council and through the continued raising of human rights issues during bilateral visits. Jeremy Browne told us that during his recent visit he had raised the issue of human rights and had been impressed with the answers he had received:

In terms of the conversations that I had when I was in Brazil, my observations are that there is a general feeling that significant progress has been made, that further progress still needs to be made, that there are groups in society who can feel excluded or unfairly treated, and that there may be a lag in some areas between social attitudes and the law—in other words, something may not be legal, but that does not mean it does not happen, and I am thinking about such areas as domestic violence, for example. However, there seemed to be a high degree of awareness of those subjects, and the resolve to make progress. I felt like I was talking with a group of people—the parliamentarians and Ministers that I met—who shared our views and our approach to such matters.144

113. Following our evidence session, Mr Browne wrote to us to clarify Brazil’s position with regards to specific international conventions, specifically Brazil’s non-acceptance of Article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination and the amendments to Articles 17 (7) and 18 (5) of the Convention

143 US Department of State, 2010 Human Rights Report: Brazil, 8 April 2011

144 Q 139


against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. The Minister also wrote to us regarding Brazil’s non-signature of the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families, and the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, conventions to which the UK is also a non-signatory. In all cases the Minister confirmed that he had not had specific conversations on these matters with his Brazilian counterparts. Despite Brazil’s position on these specific points, the Minister commented that “Brazil has certainly made some progress in its protection of individual rights” and “Respect for individual rights irrespective of race, colour, descent, or national or ethnic origin is a key theme of our [the UK’s] discussions with Brazil”.145

114. In this letter, the Minister also explained how the FCO is working towards the promotion of human rights in Brazil. The FCO is “funding work in Brazil by the Association for the Prevention of Torture on effective implementation of the Optional Protocol to the Convention against Torture, which Brazil has ratified”146 and the British Embassy in Brasília is encouraging Brazil to accept Article 8 of the International Convention on the Elimination of All Forms of Racial Discrimination. The Minister further noted that “the EU-Brazil Human Rights Dialogue is an important part” of the discussion on human rights and the “latest talks, on 26 May, in Brasília, were wide-ranging and open, with substantial engagement from the Brazilian side”.147

115. The Government provided us with a summary of their assessment of human rights in Brazil. In this summary:

• The Government restated their belief that President Dilma is determined to strengthen human rights as a priority of her leadership and that this can be seen by Brazil’s vote in favour of a Special Rapporteur on Human Rights for Iran in the [UN] Human Rights Council in March 2011.

• The Government stated that “The Brazilian government is open to discussion of human rights issues ... [and] The Brazilian Government itself recognises that there is still progress to be made on a number of challenging domestic human rights issues.”

• The role of the British Embassy in Brasília was set out. The Embassy holds “forms of stakeholder meetings with NGOs on human rights in Brazil, through the EU human rights groups”.148

116. We conclude that a gap remains between some of Brazil’s international commitments to human rights and their implementation. We recommend that the Government take advantage of the planned series of ministerial visits to continue to raise the implementation of human rights with Brazilian ministers. During our visit we heard informally that a lack of philanthropic culture in Brazilian society means that human rights charities and organisations are dependent on funding from the Brazilian government. We therefore recommend that the FCO should consider making a

145 Ev 67

146 Ev 67

147 Ev 67

148 Ev 71


contribution to the funding of Brazilian human rights NGOs and in its reply to us update us on its work in this regard.


7 Environmental concerns 117. Brazil, and Latin America, as a whole will be vital in tackling climate change and global warming. The Foreign Secretary has called the region the “lungs and aquifers of our planet”. The area provides “40% of the world’s remaining rainforest, 35% of global reserves of freshwater and 25% of the world’s cultivable land.”149 The environment and deforestation are both important issues in domestic Brazilian politics—between 2002 and 2007 the number of Brazilians ranking the environment as their top concern more than doubled to 85%—and President Rousseff is said to be a “keen champion of pro-environmental, climate-change-mitigating policies”.150

118. Brazil is also an increasingly active country in international environmental protection negotiations. Brazil played a key role in both the recent international climate change conference at Cancun and the conference on biodiversity in Nagoya. David Norman of WWF told us that “Brazil is a positive partner in many areas on the environment. Not only does it have a critical set of environmental assets, but it is putting itself on the line in several international forums in trying to make a difference.”151

119. The FCO was keen to highlight their role in encouraging Brazil’s positive participation in these fora. The FCO’s memorandum stated that “there was exemplary Brazil/UK co-operation at the Nagoya biodiversity and Cancun climate change meetings in 2010”.152 Jeremy Browne noted that “when I spoke to our Climate Change Secretary about the Cancun Summit, I was struck that he said that the closest partnership he had was with the Brazilians”.153 Dr Sandra Charity of the WWF acknowledged that the FCO, and the UK Government at large, “has been and is already playing an important role”.154 Jeremy Browne further noted that the close collaboration between the UK and Brazil was a precursor to a closer relationship on many global issues and a partnership based on shared values:

there is a high degree of compatibility between our political approach and that of the Brazilians. [...] Brazil is quite a good voice internationally in terms of our values. Rather than having the familiar cast list of European countries and North Americans making those points, there is the opportunity for a new voice to make points that we would support.155

120. Brazil has also chosen to act unilaterally to tackle climate change and the linked issue of deforestation. Ahead of the Copenhagen Climate Change Conference, Brazil unilaterally imposed binding targets on itself for the reduction of emissions. Brazil is legally committed to reducing its greenhouse gas emissions by between 36 and 38.9% by 2020. In addition,

149 Canning Lecture, 10 November 2011

150 Q 163

151 Q 57

152 Ev 46, para 17

153 Q 163

154 Q 59

155 Q 125


the FCO states that Brazil has adopted an “ambitious” target to reduce levels of deforestation by 80%.156 Mr Norman suggested that these domestic efforts were a sign of Brazil showing international leadership:

It is bridging the divide between the traditional bloc of developing countries, and the G77157 and the developed countries. In the Copenhagen climate summit, it put its own targets on the table, quite explicitly, for a reduction of emissions against business as usual—36% to 39%. They are very firm targets, and were quite important in moving on the negotiations.

The rationale behind that was very much one of leadership. It was in a sense saying, “We will do this anyway, whatever other countries do.” This is pretty important.158

Mr Norman further suggested that Brazil was already a global leader on this matter and a key player in international climate change negotiations:

Because of Brazil’s moral authority on deforestation issues and its having a pretty clean electricity sector, it is in a position where others are potentially swayed by its arguments. It is looked up to within the G77, so it already plays quite a significant role.159

And Professor Hurrell noted that Brazil’s leadership on an issue such as climate change could be a sign of Brazil’s willingness to take an active stance on other international issues:

In a number of areas one can see an active realisation about ongoing engagement, particularly when the thing you are engaging with is changing. I think climate change is a very good example. Through the nine months before and up to Copenhagen we saw a lot of movement inside Brazil as well as in terms of positions outside.160

121. Despite the generally positive role that our witnesses had identified Brazil as playing in tackling climate change and deforestation, during the course of our inquiry the media reported one apparently retrograde development in this area. On 20 May 2011 it was reported that Brazil had formed a “crisis cabinet” in response to a 27% year-on-year increase in Amazon deforestation.161 This increase has been linked to higher demand for farmland for soy growing and the expected passage of a new law loosening restrictions on deforestation. Currently the law requires 80% of the rainforest to be left as untouched forest, but the proposed law will reduce this figure to around 50% depending on the type of land. The new law will also grant an amnesty to farmers who illegally cleared land between 1965 and 2008. The Independent reported that “in addition, farmers will, for the first time, be allowed to count land along rivers and lakes as part of their legal preserves. And strict

156 Ev 46, para 17

157 The “G77” was established in 1964 as a caucus of 77 developing countries within the UN. There are currently 131 members of the G77, including some “developed” or “semi-developed” countries, including China, India and Brazil. http://www.g77.org/

158 Q 57

159 Q 64

160 Q 99

161 “Brazil forms “crisis cabinet” following unexpected deforestation surge”, The Guardian, 20 May 2011


rules governing deforestation of hilltops and slopes will be relaxed.”162 It was claimed that this new law will lead to a further 10% reduction in rainforest cover.163

122. We raised our concerns over these developments with Jeremy Browne. We asked him whether the FCO had make representations to the Brazilian government on this matter. He assured us that:

Yes, we do have a view. Yes, we are concerned. Yes, we are making representations. My understanding is that this is a live debate, which we are keen to influence—primarily, it is an internal debate within Brazil, although it has wider ramifications. Our understanding is that the President is in a very strong or resolute position, which we approve of her being in.

123. Mr Browne also felt that President Rousseff was, “personally on the most environmental end of the scale [...] She favours Brazil continuing to meet the more onerous end of the targets—the 80% reduction.”164 Vivien Life of the FCO also noted that, regardless of these proposed changes to the Forestry Code:

Brazil has made commitments in the UNFCCC165 for an overall reduction in carbon emissions, and its 80% target with regard to deforestation makes up 50% of its ability to reduce emissions. So at the moment, Brazil is bound—not legally bound, because we don’t have a legally binding UNFCCC, but, given how Brazil wants to position itself as a leading green country, it is unlikely to want to retreat from the targets it is committed to in the UNFCCC.166

124. We welcome Brazil’s leadership role on international solutions to tackle climate change and the work of the FCO in promoting and supporting this position. We look forward to continuing close co-operation between the UK and Brazil on climate change, and hope that this forms the basis for a long-term relationship based on shared values. We recommend that the FCO continue to build and strengthen this relationship and push towards further agreements at the upcoming Rio+20 and Durban Conferences.

162 “Slash and burn; Brazil shreds laws protecting its rainforests”, The Independent, 26 May 2011

163 “Brazil’s lower house approves looser forest protections”, Washington Post, 26 May 2011

164 Q 165

165 United Nations Framework Convention on Climate Change

166 Q 166


8 Conclusion 125. The FCO’s announced commitment to a stronger bilateral relationship between the UK and Brazil is much overdue and very welcome. The rise of Brazil represents a great opportunity for the UK, both as a source of a strong commercial relationship and in providing an increasingly important partner in tackling global issues. The potential commercial benefits are well known and understood, but in areas such as energy security, the environment and tackling international crime, a stronger bilateral relationship with Brazil will also be of great benefit to the UK.

126. It will be clear from our Report that Brazil’s increasing economic power and political influence is very much a “good news” story for the UK and the wider world. The overall assessment must be that Brazil is a democratic, well-governed, responsible state, unthreatening to its neighbours and with much to contribute to the international community. Nonetheless, it would have been remiss of us if we failed to deal with a number of issues which have the potential to undermine or deflect development of the desired stronger bilateral relationship. We hope that the UK Government will take such steps as are within its power to encourage Brazil further to improve its internal human rights record, to tackle problems of corruption, and to maintain a balanced and moderate stance on the Falkland Islands.

127. A closer bilateral relationship between the UK and Brazil can only be achieved over the medium term through sustained pressure and effort. The UK’s present strategy towards Brazil is encouraging; we urge the Government not to allow momentum to be dissipated or its attention to be distracted by more dramatic developments elsewhere in the world. We will continue to monitor developments throughout the current Parliament.


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 RosindellMr 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. 134.

Written evidence was ordered to be reported to the House for printing with the Report, together with written evidence reported and ordered to be published on 11 May, 8 and 22 June 2011.

[Adjourned till Tuesday 18 October at 10.00am


Witnesses

Wednesday 27 April 2011 Page

Neil Atkinson, Director, Energy and Utilities Research and Analysis, Datamonitor, Paul Domjan, Director, John Howell and Company Ltd., and Dr Frank Rosillo-Calle, Honorary Research Fellow, Imperial College London Ev 1

Mark Bishop, Head of Strategy, Co-ordination and Development, International Department, Serious Organised Crime Agency Ev 8

David Norman, Director of Campaigns, and Sandra Charity, Head of Forest Programmes, WWF-UK Ev 12

Wednesday 11 May 2011

Nicholas Armour, Director, International Group, UK Trade & Investment, Tony Lamb, Latin Americas Team, International Group, UK Trade & Investment, and Philip Brown, Trade Policy Unit, Department for Business, Innovation and Skills (BIS) Ev 16

Professor Andrew Hurrell, Montague Burton Professor of International Relations, University of Oxford, and Dr Marieke Riethof, Lecturer in Latin American Politics, Institute of Latin American Studies, University of Liverpool Ev 23

Wednesday 8 June 2011

Mr Jeremy Browne MP, Minister of State, Foreign and Commonwealth Office, Angus Lapsley, Director, Americas, FCO, and Vivien Life, Acting Director, Prosperity Directorate, FCO Ev 30

List of printed written evidence

1 Foreign and Commonwealth Office (FCO) Ev 44, 69, 71

2 Embassy of Brazil Ev 48

3 Serious Organised Crime Agency (SOCA) Ev 53

4 WWF Ev 54

5 Michael Evans Ev 54

6 Dent Associates Ltd Ev 55

7 Professor Dr Gisele Araujo Ev 57

8 TheCityUK Ev 62

9 British Council Ev 65

10 BBC World Service Ev 66

11 BG Group Ev 67

12 Mr Jeremy Browne MP, Minister of State, FCO Ev 67


13 Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, FCO Ev 68, 69

14 Embassy of the United States of America Ev 69

List of unprinted evidence

The following written evidence has been reported to the House, but has not been printed and a copy has been placed in the House of Commons Library, where it may be inspected by Members. A copy is in the Parliamentary Archives (www.parliament.uk/archives), and is available to the public for inspection. Requests for inspection should be addressed to The Parliamentary Archives, Houses of Parliament, London SW1A 0PW (tel. 020 7219 3074; email [email protected]). Opening hours are from 9.30 am to 5.00 pm on Mondays to Fridays.

Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs

Foreign Affairs Committee: Evidence Ev 1

Oral evidenceTaken before the Foreign Affairs Committee

on Wednesday 27 April 2011

Members present:

Richard Ottaway (Chair)

Mr Bob AinsworthMr John BaronSir Menzies CampbellAnn ClwydMike Gapes

________________

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, ImperialCollege London, gave evidence.

Q1 Chair: I welcome everybody to this session ofthe Committee, our first oral evidence session for theCommittee’s inquiry into UK-Brazil relations. Thepurpose of this session is to examine three discreteareas of activity in Brazil that directly affect the UK’sinterests: energy security, crime and the environment.I start with an apology for the fact that the witnessesand members of the public have been kept waiting.We had a rather pressing matter to attend to, and Ithank you for your indulgence.I give the first three witnesses a very warm welcome.It is very much appreciated that you have taken thetime to come and see us. Perhaps I could start thequestioning on the oil sector. Could you set out howimportant you see the sub-salt fields are both to globaloil production and to Brazil as an aspiring power? Therecent discovery of what has been a pretty substantialoilfield there is obviously of huge economic andpolitical impact, and I would be interested to hearyour views. Mr Atkinson, do you want to go first?Neil Atkinson: I am happy to start on that one. Weface a situation where demand for oil is continuing toincrease at a fairly rapid rate for the foreseeablefuture—

Q2 Chair: Globally or nationally?Neil Atkinson: Globally, led of course by developingcountries such as China, India and indeed Brazil itself.The issue will arise more urgently over the nextdecade or so of the challenges to meet that demandby finding oil and gas around the world. There arepeople, of course, under the heading of peak oil, whobelieve that the challenge of finding that supply willbe more difficult than others believe.To cut to the chase, Brazil in the past few years hasbecome an increasingly important source of futuresupply. The pre-salt reserves, which were estimated atsomething like 80 billion barrels, are an enormousfind, and an enormous source of future supply. To putthat into context, the current crude reserves of the UKare something in the region of 3.5 billion to 4 billionbarrels, depending on whose figures you believe, andthe crude reserves of Saudi Arabia are something inthe region of 250 billion barrels, again depending on

Andrew RosindellMr Frank RoySir John StanleyRory StewartMr Dave Watts

whose numbers you believe, so this is a verysignificant, almost game-changing find in globalterms. As for what it will mean for Brazil itself, as Isaid a moment ago, Brazil’s own demand for oil willcontinue to rise quite strongly because its populationis rising fast and its economy is developing fast, so itwill have a large own use for oil; however, if it issuccessful in developing the pre-salt reserves of 80billion barrels, in addition to the other resources ithas, Brazil will be, or should be, in a position to be asignificant exporter. Brazil is going to have anincreasingly important role to play in the global oiland gas picture for the next 20 or 30 years or so.Paul Domjan: I agree with that. I think the discoveryis on a global scale, but I would argue that if we lookover the next 10 years—I will take this from more ofa supply side than a demand side—it still is primarilya Brazilian story. If we look at Petrobras’s numbers,we are talking about something in the order of 1million barrels a day in incremental production by2020, which is 1% or 2% of global production at thatstage. What we have already seen, though, is thatBrazil’s success with the drill bit, at expandingproduction, has made the world’s ninth-largest energyconsumer, and its eighth-largest economy, a net oilexporter, as Mr Atkinson just said, which has had amajor impact on Brazil’s reserves and balance ofpayments, as well as contributed to stabilising theworld energy system.By 2020 the pre-salt will account for 25% of Brazilianproduction, which will make Brazil a meaningful oilexporter, with something in the range of 1 million to1.3 million barrels a day of exports. In terms ofBrazil’s total economy, however, oil exports will risefrom 9.5% of total exports today to approximately38% of total exports. That increases the share ofBrazil’s top three exports, which we treat as a measureof export concentration, from roughly 26% to 60%, soit has a major impact on the shape of Brazil’seconomy, if not on the global energy system in quitethe same way.One of the most important impacts on Brazil will bethe debate on establishing a sovereign wealth fund.Brazil could today establish a $110 billion sovereign

Ev 2 Foreign Affairs Committee: Evidence

27 April 2011 Neil Atkinson, Paul Domjan and Dr Frank Rosillo-Calle

wealth fund, roughly on a par with Russia, and stillmaintain its import cover at seven months, which weconsider a benchmark. Today, Brazil has a fund thatinvests in state companies, but not one that savesforeign currency earnings. Obviously, this productionwill be a huge source of new foreign currencyearnings. For that reason, when we think about theUK-Brazil relationship, we should be thinking aboutthe financial side as well as the oil side, because ofthe revenue the oil will produce.Dr Rosillo-Calle: I apologise to the Committee—Ihave a very bad throat, so if I talk too low, please letme know.Chair: I will wave my pen.Dr Rosillo-Calle: Okay. I agree with what Paul andNeil said. One thing that has not been mentioned hereis that, according to quite a few studies, Brazil hasreserves 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 amconvinced of that. I have my data here.1 Brazil hasabout 7.5 million square kilometres of sedimentaryareas, of which only 4% have been fully explored, sothere is huge potential. I do not know whether moreoil will be found, but all the new studies indicate thatthe potential is far greater than thought up till now.Another point I would like to make is that Brazil is ina unique position in the world because, contrary tomany other oil-producing countries, Brazil hassomething unique: it has a path that will enable it tobecome energy self-sufficient.2 Brazil can produce alot of energy now and will be able to do more in thefuture. Brazil already produces about 46% of allenergy consumed in Brazil from renewables. It alsohas a biofuel industry which is the most important,well developed and economically viable biofuelprogramme that we have in the world today. To that,you have to add the potential agricultural production.Everything is intertwined, so the country relies notonly on oil but also on the biofuel, renewable energyand agriculture sector. The country has enormouspolicy flexibility to become a major exporter of oiland also be able to diversify the energy supply.

Q3 Chair: Do you think Brazil’s energy credentialsare damaged by the discovery of this field?Dr Rosillo-Calle: No, I don’t think so because in thepast, people said, what happens to the biofuelprogramme if Brazil becomes energy self-sufficient iflarge amounts of oil are discovered? It is very difficultto say, but I think the Government have realised thatkeeping the biofuel programme for environmental,socio-economic and political reasons, is moreimportant than shutting it down. The policy is to keepproducing oil, become a major exporter of oil, developthe biofuel industry which will be largely used in thedomestic market, and also become an exporter ofbiofuel, because Brazil has the capacity and skills todo so.

Q4 Chair: Can you tell us how difficult it is toexploit these fields? The high costs of doing it must1 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 difficultieswith this field? Are there any lessons to be learnedfrom the feasibility of extracting oil that we had in theFalkland Islands, which turned out to be ratherexpensive?Neil Atkinson: I think the Falklands is rather smallbeer compared to what we are talking about here.Somebody 40 or 50 years ago promised to drink everydrop of oil that would be produced in the North Sea,and I am tempted to offer to do the same for Falklandsoil. That is probably a reckless promise, but theFalklands is small beer.Brazil is hugely serious because of the vast quantities,but also because of the fact that a very high proportionof Brazilian oil is produced in very deep waters, so itis very technically challenging and very expensive. Aswe move forward, we think Brazilian productioncould rise to over 5 million barrels a day or so by2020 or 2025—something like that—and over 3million barrels a day of that production will be fromdeep 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 bedone and by whom, because—forgetting the capitalfor a moment—the expertise required to carry outinvestments of that type, and successfully and safelyto produce the oil, is the kind of expertise that Brazilhas a great deal of, or some of, but it will almostcertainly require external help. To receive that externalhelp and investment, it will need to offer aninvestment climate that is attractive to people with theexpertise, which raises a whole new question abouthow it will develop the resources. They are verychallenging because they are in very deep waters. Thesalt resources are, I think I am right in saying,probably the biggest discovery and potentialdevelopment of its kind we’ve ever seen around theworld, although there have been other examples.

Q5 Chair: With the Americans calling yesterday foran upping of production to push the price down,would a falling price actually affect the economicsof this?Neil Atkinson: Yes. These are very broad indicators,but obviously the more technically challenging theprospect is, the more expensive it is to develop. Thereare very ballpark figures, but if the oil price were tofall—it is actually quite unlikely—below $60 or $50a barrel, a lot of the more technically challengingresources, such as the Brazilian fields and other placesaround the world, such as the Canadian tar sands,would be questionable. However, that is highlyunlikely, and in any event the call from the Americansto produce more to put the price down is a typicallyfacile response to high gasoline prices.

Q6 Chair: Will anyone have a stab at what the priceper barrel would have to be to make it economicallyviable?Neil Atkinson: For Brazil, I think at least $30 to $40a barrel—something like that.Paul Domjan: If we think about marginal supply andthe price falling, there’s a lot of supply that goesbefore Brazil, so this isn’t really a price-driven gamein that sense. Supply will contract and push prices



back up before it gets to the level at which this startsto become uneconomical.Neil Atkinson: Operating costs are the key to keepingoil production going. Most of the production aroundthe world is from mature fields, where the capitalcosts were sunk years ago. As long as operating costshave been covered, which are significantly lower than$30 or $40 a barrel in most countries around theworld, it isn’t an issue.Paul Domjan: I would agree that technically it issomething that Brazil has the expertise to do, but ifwe look at the scale of the challenge financially, theseare $100 million well completions, which areexpensive wells and that is one of the main sourcesof cost.

Q7 Mike Gapes: There has been a lot of commentaryover the past couple of years about the impact of so-called peak oil. I am interested to know whether theBrazilian discoveries are factored in to that equation,or whether what is happening in Brazil actuallychanges the debate and moves the crisis point forwardseveral years or decades.Neil Atkinson: I started analysing oil markets for thevery first time in about 1980 or 1981, and at that timepeak 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 excitingand they will yield much higher production fromBrazil as we move forward, but there are other placesaround the world where production is falling. Here inthe UK is the most obvious example, perhaps nothelped by recent tax changes—or maybe they won’thave an impact; we will wait and see—but there areother countries where production is falling.The issue is whether technological improvements andbetter knowledge of reservoirs, as we gain it, willenable more to be produced than was previouslyexpected from existing fields. So far, we are producingmore than we thought, and the day when peak oilreally comes—when total world supply can go nohigher, and will only start to fall—has been pushedback well into the next decade, I believe.Paul Domjan: There is another wrinkle to it, whichis important in the energy security area in particular.We can divide the world’s oil into three buckets: theoil that is technically relatively easily accessible instable, mostly democratic countries that are easy to dobusiness in; the oil that is technically accessible inpolitically challenging environments, which may notbe politically accessible; and technically difficult oil.That creates what I would call a political peak oilproblem. We would not be in a peak if we couldexploit all the resources that are out there, but thereare some very large resources—whether they are inthe Middle East or the US outer continental shelf—that are simply off the table for political reasons.Neil Atkinson: That answer will segueway neatly intothe third part of the set of questions, which involvesBrazil’s relations with organisations such as OPEC, soI suspect that we may come back to that.Dr Rosillo-Calle: Brazilians admit that the costs ofproduction vary. My data showed me that in some ofthe deep water, it is about $40, but in others it is about

$50 or $60, because some of those findings are in verydeep water.Brazil now offers one of the best environments forforeign companies. In fact, all the main oil companiesare investing in Brazil. All the big companies arebringing their own technological know-how—especially the British in the North Sea—which isbeing applied to Brazil. There is a very important rolefor the UK to transfer more know-how to the Brazilianside. North Sea oil is very difficult to extract, becausethe weather is far rougher than it is in Brazil. There isa lot of potential co-operation here, which is alreadyhappening now that the oil companies are putting alot of money into the Brazilian oil industry.Paul Domjan: It goes to the core of the technicalchallenge, which is that Tupi, the first pre-salt field,has been online for two years, so the technicalchallenge is addressed. This oil is successfullyproduced; it is technically possible. The question isthen about mobilising the human capital—the physicalcapital, the financial capital—to expand that.Between now and 2014, Petrobras plans to investsomething like £224 billion globally, about half ofwhich will go into the pre-salt. But there are realquestions, given Petrobras’s financing situation, aboutwhether it will be able to come up with the financialresources. If it is going to be the operator of all thesefields, will it have the engineering capability and thephysical plant to be able to do what it plans?

Q8 Mr Watts: Can I follow that up? Whatopportunities are there for British companies with thediscovery of the sub-salt fields? What are the Foreignand Commonwealth Office and UKTI doing tomaximise the potential for the British economy out ofthe finds in Brazil?Paul Domjan: I can talk about the opportunities; Icannot comment on the FCO’s ability to recognisethem. Brazil has recently changed its regulatoryenvironment to make Petrobras the designatedoperator, which has been greeted with some disdainin the UK. However, there are some good reasons whythe Brazilians want to do that. That is not necessarilyan impediment to UK investment—it does not preventit. Petrobras will still need financing and technicalsupport. It will still need to rent vessels, and it willneed engineering and a whole range of other services.The UK is a world leader in all those areas. Petrobraswill need to raise another $60 to $70 billion, if Iremember correctly. The City of London is one placeto do that. The Brazilian market will need to buildliterally dozens—perhaps as many as 100—of newdrill ships, staff those ships with engineers and hirecontractors to do all that work. A lot of thosecontractors will be UK-based, from Aberdeen. Thereal competition is the extent to which there is atension between developing a domestic industry,which Brazil is keen to do, and bringing in foreigncontractors, whether they are from Houston orAberdeen. There is a role for the FCO and UKTI: towhat extent can they show the Brazilians that workingwith the UK is an opportunity to develop the domesticindustry, rather than a zero-sum game for thedomestic industry?



Q9 Mr Watts: Are there any signs that we are takingthose opportunities? Are we out there in numbers?Paul Domjan: BG has a project there in theinternational oil company space. The real opportunityis not going to be the international oil companies asequity participants; it is going to be the servicecompanies that are supporting Petrobras. That’s whereI 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 areopportunities, first, because the Brazilianopportunities themselves are good, but also becauseother countries around the world are becomingincreasingly hostile to the international oil companiesand the international equipment manufacturers, fortheir own reasons. It is no longer so easy for foreigncompanies to operate in, for example, Venezuela orRussia, and there are other examples that we couldchoose. One of the overall problems that theinternational oil companies face, as well as themanufacturers and service suppliers, is that they areopportunity constrained in many cases. Brazil is afavourable environment and a huge opportunity, sothey should be all over Brazil like a rash, frankly,because it is one of the best opportunities on the planetfor British companies and anybody else with deep-water expertise in particular, which we have.Paul Domjan: One way to think about this is that theregulation says Petrobras must be the operator, and itmust have up to 30% stake in oilfields. GivenPetrobras’s financial resources, that probably meansthat it will have a 30% stake in oilfields, so there is70% equity participation left to play for in theinternational arena. On top of that, this kind of blanketoperatorship—and we have seen this in othercountries such as Kazakhstan, where there is a variantof it, to some extent—means a lot of opportunity forforeign companies to come in as co-operators, jointoperators, or as technical operators on part of theproject, so there’s still a lot of scope for the UK toplay a part in this.

Q10 Mr Watts: You touched on the decision by theBrazilian government to take more control over theiroil company and also over the salt fields. Whatimplication has that got for the future relationshipbetween British companies, potentially, and Brazil?Paul Domjan: British companies need to understandwhat the Brazilian government’s motivation is, respectthat, and ask how Britain can help to advance thatmotivation. I think that motivation has, at a very highlevel, three components. One is maintaining a role indirecting the course of pre-salt development, and thatmay include slowing the speed of pre-saltdevelopment to an extent. Oil often appreciates morequickly in the ground than in the financial markets asrevenue. It means maintaining a substantial share ofthat revenue, both as licence payments, and as equityin Petrobras and dividends of Petrobras to the state.However, I think the third one, which really gives anopportunity to the UK, is developing the local oilservices industry. It is about UK companies showingthat they can actually be partners with Brazilian firms,that they can develop Brazilian expertise, train

Brazilian engineers, and develop an industry in Brazilthat is world class.Brazil is already, for example, in discussions withPemex to export Petrobras expertise to Mexico. It isvery pleased to be seen as a world leader in deep-water expertise, and the UK can help build that. Thatis particularly important if you look at the structure ofthe Brazilian industry. Normally, you expect a wholecollection of smaller firms that are very innovative,which then contract to large firms, with technicalinnovations flowing down from large firms but also upfrom small, innovative service companies. In Brazil,technical innovation is clustered in Petrobras. Thekind of community of smaller firms that make aninnovative cluster is not there, so that’s then anopportunity for the UK firms to help develop Braziliansubsidiaries that will meet part of the Government’sgoal by becoming this broader, innovative cluster.

Q11 Mr Watts: Would I be putting words in yourmouth if I suggested the answer to the question isthat the changes have taken place? More control beingtaken by the Brazilian government means that therelationship between anybody and the Braziliangovernment will be a crucial factor in success outthere. Would you go as far as to say that?Paul Domjan: I would put it slightly differently. Thedegree to which the aims of the Brazilian governmentare supported will be crucial to success.

Q12 Mr Watts: To do that, you’d have to have arelationship and you’d have to know what they want.Paul Domjan: For certain. A lot of these smallercontractors won’t have a direct relationship with theBrazilian government, but they will be supporting theGovernment’s policy aims through their relationshipwith Petrobras.

Q13 Mr Ainsworth: Can we shift to ethanol? Brazilhas almost a monopoly of sugarcane ethanol, whichhas a higher conversion rate there than other forms ofethanol. What are the politics of that? Is there politicalsignificance to that monopoly and the way in which itwould pan out if it was an oil situation?Dr Rosillo-Calle: I think things have changed sincethe alcohol program started in 1975. The industry wasthen dominated by domestic capital. They did not likeforeign capital. That has changed and I think in thelast 15 years—no, less than that; maybe five or sevenyears—the industry realised that it needed foreigncapital 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$3004 million. Like BP, you have Shell and manyother oil companies, and other biofuel producers inEurope are investing in Brazil.Brazil is unique because it has a long historicalexperience in using sugarcane, which is a very goodraw material. It is very efficient and economicallyviable and here a distillery is the closest we have to abiofuel refinery. You produce ethanol, sugar and allthe heat and electricity that you need for youroperation. You have an efficient boiler and you can3 Note by witness: should say 83% of shares.4 Note by witness: should say $680.



produce surplus electricity that you can sell to thenational grid. On top of that, you can produce animalfeed, CO2, yeast and so on.A lot of capital is moving in now. It is opening a lotand there are many good opportunities for the UK,basically helping the Brazilians to develop sustainablecriteria. I have some further points to make. At themoment, you need to ask for greater co-operation onthe research and development of biofuel—especiallyR & D on second and third generation. You need tohelp rather than impose sustainability criteria on theBrazilians, and there are also the agricultural issues.We need to develop a mutually agreeable certificationscheme. The UK has a good experience with therenewable transport fuel obligation. It can play animportant role in opening up the Brazilian market,which will be a major exporter, and the cheapest, so Ithink there are many opportunities for UK companiesto co-operate with the ethanol production industry.

Q14 Mr Ainsworth: What effect do the import tariffsthat the EU maintains on ethanol have on EU-Brazilian relations?Dr Rosillo-Calle: There have been many problemsand I think Brazilians have complained about that.One thing we need to do—Europe and the UK, whichhave very strong free market philosophies—is that allthe import tariffs should be, if not abolished, at leastreduced considerably. If you want to compete, youshould not use high tariffs. We need import tariffs thatare economically viable, which does not happen inEurope. There needs to be a balance here so that sometariffs might be applied, but they have to be muchlower. The UK could help a lot in achieving thosethings.

Q15 Mr Ainsworth: Why have we maintainedthose tariffs?Dr Rosillo-Calle: As I see it, it is because Europe—basically, France—has a lot of potential to produceethanol, and the raw material is the key factor. Theraw material in Europe is very expensive. Therefore,a way of protecting the domestic supply is to imposea high tariff, so you can compete. Somehow, we needto look at that, because it is not fair that the lessefficient producer is supported while the moreefficient are penalised.

Q16 Mr Roy: Turning to oil and diplomacy, I have athree-part question. How has Brazil’s oil wealthaffected its foreign policy? Is it fair to characterise itas being more assertive as a result of the increase inoil? Specifically, have UK-Brazilian relations changedbecause of the oil wealth? Thirdly, we spoke earlierabout oil prices in relation to OPEC. Will a new morealigned alliance of Brazil, Russia and so on be a directcompetitor to OPEC?Neil Atkinson: I have been a camp follower of OPECfor many years. I worked for many years for thenational oil company of a country that is a member ofOPEC, and I used to support the OPEC delegation. Ibelieve that OPEC is an entity that countries are morelikely to leave than to join, and there is a simplereason for that. Why on earth would a country likeBrazil wish to join an organisation with which it has

very little in common politically, other than theownership of large oil reserves? It wishes to see thosereserves developed and attract foreign investment tohelp that process, but the only way it can attract thatforeign investment, and indeed reward its domesticinvestors, is by providing a return. That return isprovided by increasing production and selling the oilto markets that are growing.The OPEC countries are different from Brazil in thatthey are sitting on reserves that, as a proportion whenset against their population and various otherindicators, are absolutely enormous. They have theability to limit their production from time to timewithout significantly damaging their economy, shouldthey wish to protect oil prices. Rather like the UnitedKingdom in the 1970s and 1980s when productionwas growing, Brazil has nothing in common with anykind of OPEC strategy. I do not believe that Brazilwill ever join OPEC in the same way that Kazakhstan,another rising producer, has shown no signwhatsoever of joining OPEC. Despite efforts byOPEC in recent years, Russia shows no signs ofjoining, and the OPEC organisation, particularly in thecurrent environment where oil prices are very high,can continue to produce pretty well as much as itneeds. It is a fairly toothless organisation these daysanyway.You talk about critical relationships. The BRICcountries—Brazil, Russia, India and China—haveheld, I think, more than one summit now. There wasone quite recently in India. A political entity of somesort is beginning to emerge as a grouping of the BRICcountries, and Brazil is beginning to assert itsincreasing wealth on the world stage. It has forgedother political relationships with countries such as Iranand Venezuela. I may be missing another member ofthe bad boy’s club—ah Cuba; who could forget Cuba?Brazil is forging its own way as it becomesincreasingly assertive, but I do not believe that in thelong run it will join the oil producers club, because itis not in its interests to do so.Paul Domjan: I certainly agree with that. It isreasonable to say that Brazil will probably be happywith oil prices in the sort of $70 to $90 region. Thatwould be more than adequate and OPEC is perfectlyhappy with that. If there is any benefit to working withOPEC, it would be only from the outside in the waythat Russia occasionally does. It is important to bearin mind OPEC’s desire to maintain prices. Its targetprice has probably risen a bit now that Saudi Arabianeeds to pay for the gift that the King has just given,which is probably something like $10 a barrel in Saudiproduction for the next five or so years.There is another interesting wrinkle to this, which isthat Brazil is in the process of shifting to a more statistapproach to industrial policy. As a growing oilexporter, and a country that already has substantialforeign exchange reserves of $240 billion, there is aquestion about to what extent Brazil would be temptedto and choose to use its national reserves to supportits national champion industries abroad. Whether thatwould mean taking a role similar to that of China, ora more benign role that involves less direct foreignassistance, we do not know. It may be that Brazil doesnot choose that path at all, but it is certainly a question



that is being actively debated, particularly as Brazilincreasingly looks to China as a potential model forindustrial policy.Neil Atkinson: Brazil’s ultimate objective, if Iunderstand it properly, is a seat on the UN SecurityCouncil.

Q17 Chair: A permanent seat?Neil Atkinson: Indeed. Obviously, Russia and Chinaare already there. India and Brazil are not, but theyare of course rising significantly in internationalimportance. The ultimate goal of Brazilian diplomaticpolicy would be to become a permanent member ofthe Security Council, so it will always seek to actresponsibly and fairly, balancing the interests of thedifferent blocs around the world, which is why I donot believe it would touch an institution like OPECwith a bargepole. Brazil is looking to achieve thatobjective—to cement its place at the top table as agreat country, a big powerful country with a hugeindustrial base and take what it thinks is its rightfulplace.Dr Rosillo-Calle: Brazil is very unlikely to join OPECbecause the economy in Brazil is very different. Youhave three key sectors: oil; biofuels and renewableenergy; and agriculture. Brazil doesn’t depend on oilas a major revenue. It is only part of the revenue forBrazil. It is not a major revenue. Because it is verydiverse, I think, as Neil said, there is no incentive forBrazil to join OPEC.

Q18 Mr Roy: What unique attitude does Brazil’snew oil wealth bring to its foreign policy, if any?What does Brazil have that other countries that haveno interest do not have? We know that they have spentan awful lot in Haiti, for example. Do they have afavoured area or region of the world? Do they have afavoured project type mentality towards anyone else?Neil Atkinson: I am not aware of that.Dr Rosillo-Calle: My understanding is that theBrazilians so far have earned a lot of money from oil,but the money they have earned has gone into twoareas. First, they have reinvested it in the oil industryfor new exploration and, secondly, they havedistributed it in social uses. For example, Brazil is avery unequal society. Former President Lula and thenew Government are putting a lot of emphasis onreducing poverty, so a lot of funds from oil revenueare going to be redistributed across society. That ismy understanding.Paul Domjan: I think it is important to keep this inperspective. In 2020, Brazil’s economy will not looklike Saudia Arabia’s. It will not look likeKazakhstan’s. It will look like Mexico’s or Malaysia’sin terms of the scale of oil production in the economy,so it is not necessarily a fundamental change. It willnot turn into Saudia Arabia. It will still be a diversifiedeconomy. The Brazilian trade mission to China lastmonth focused on industrial exports. The 300 businessleaders went to China to sell jets, trains andmanufactured goods. It is very different from whatyou would expect of a trade delegation from an oil-dominated economy. What Brazil is looking for inChina is not a market for its oil. It has that. It is notan investor in its oil. It knows it can get that. It is a

market for manufactured goods. We need to bear inmind that Brazil is still going to be a middle-income,manufacturing, and as Dr Rosillo-Calle said, verydiversified economy.It is important that we keep bioethanol in perspective.It has been a huge success in Brazil, but that means ithas displaced something like 14% to 17% oftransportation fuels. It is 4% of Brazil’s energy, asopposed to 41% for oil and 39% for hydro. It is animportant export earner, but it’s not going to driveBrazilian international policy in the way that even oilor manufactured goods would.

Q19 Rory Stewart: To keep hammering the simplepoint: are there any specific political security ordefence threats posed by Brazil’s emerging wealth? Isthere anything that you could see over the next 20years which the US, the UK or the West should beanxious about?Paul Domjan: I would not say anxious. I think thereis an opportunity. Mr Atkinson alluded to Brazil’sdesire to have a seat at the top table in internationalaffairs. One can characterise Brazil as a responsible,developed market economy with a strong democraticfoundation. It is the country that we would like tohave at the top table in international affairs. We wouldlike to shoulder a larger share of the burden. I ammuch less troubled by Brazil’s emergence than I mightbe if it had happened in many other places. It is veryencouraging. We just need to keep a dialogue withBrazil. The danger is to push Brazil very quickly intoa sort of caricature position because it is now a majoroil exporter. It does not change what Brazil is, whichis not fundamentally about oil.Dr Rosillo-Calle: Brazil is not China. Brazil sharesthe philosophy and culture of the western world.Brazil has been very focused on either the UnitedStates or Europe. I do not think that it is possible forany Brazilian government just to refocus completelyand say we are going to be totally independent. Chinaposes a greater danger; it is a very different culture. Ido not think that that will happen with Brazil. It sharestoo many of the values of the West. However, politicsis impossible to predict.

Q20 Rory Stewart: What are the implications for theUK Foreign Office in engaging with Brazil over thenext 10 to 12 years? How should we be using thelevers to help move Brazil into such a position? Whatshould we not be doing?Dr Rosillo-Calle: The UK has to take into accountthat Brazil is unique. I say “unique”, because it hassomething that would benefit your country. It has ahuge amount of energy resources. It has a lot ofnatural resources that are used in different ways, forexample, biofuels. The Brazilians are also very keento export agriculture products. Brazil has perhaps thegreatest potential in the world when it comes toagriculture. Agriculture is very important for Brazil,for the economy and for export. Brazil is looking atthe European Union especially, and the US and alsoChina because China will import a lot of products.There are many areas on which to co-operate. Do notthink of Brazil as only having one area with which towork. There is energy, agriculture and many other



areas. You need to look at the country as a wholerather than focusing on a particular area. That is howto keep very much involved with the Brazilians.Paul Domjan: I certainly agree. Brazil’s exportstructure today is, first, iron ore, then petroleum, thensugars and sugar-related products such as ethanol,then manufactured goods. The real opportunity for theUK at the moment is to look at how all that isproducing substantial export earnings, substantialforeign currency earnings and substantial appreciationof the real. It raises a risk and an opportunity. The riskis that Chinese economic growth falters, which isquite plausible—that will be an interesting topic for afuture hearing—as a result demand for many of theseproducts falters, and we have some really seriousshort-term economic problems in Brazil because ofthe collapsing commodity prices. Brazil isincreasingly tied to global commodity markets, butnot exclusively global oil markets. It would be achallenge for the UK to manage its relationship withBrazil and to ensure that Brazil still sees opportunitiesin working with the UK in that type of environment.The real opportunity that I want to focus on—it isimportant for determining the course that Brazil takes,as well—is for the UK to work with Brazil toencourage it to set up a framework for managing all ofits revenue. Such a framework would usually includeestablishing some sort of sovereign wealth fund andrules for how the revenue will be used—when it cancome on to the budget, when it needs to be savedoverseas and doing that to prevent foreign currencyappreciation. That would benefit the UK directlybecause some of that money would come here to theCity of London.There is a real role for the UKTI that I personallythink it does not fully appreciate in promoting the Cityof London as a source for saving oil revenue. It is alsoimportant because it helps to support the institutionsthat Brazil needs to remain a robust democracy in theface of substantial oil revenue. You need transparencyabout revenue, very clear rules that require revenue tobe debated in Parliament, and obstacles to usingrevenue to win elections. One-off windfall revenuesand substantial oil revenues should be saved for thefuture. That this generation has produced a one-offendowment does not mean that only this generationshould exclusively benefit from it. Encouraging Brazilto set up that kind of revenue management frameworkwill do a lot both to keep Brazil on the right sort ofpath as a responsible oil producer and to strengthenthe UK-Brazil relationship.

Q21 Chair: We think we have asked you all thepertinent questions, but have we missed anything? Inthe couple of minutes we have left, are there anypoints on aspects of energy security that you think wehaven’t covered?Dr Rosillo-Calle: One thing that the UK needs to paymore attention to is capacity building in the oilindustry. It is a problem for anybody who works inthe oil industry that a lot of its people are getting old.At the Imperial College, we had a meeting and allmajor energy users came to us saying “We have aproblem”, and the problem was they had nosufficiently skilled personnel. Petrobras also faces this

problem. The UK is in a very good position to offerlocal capacity building in this area throughuniversities, corporations, grants, or whatever. I thinkit is an important area because the UK has beenleading in the North Sea for many years and it hasvery good universities, which can prepare a lot ofgood people in the petroleum industry. Looking at therelationship between the UK and Brazil, I see that thatis an area which offers good possibilities. People donot come to the UK because there is no sufficientgrant 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 atone of them—often see local content as an obstacle.They expect HMG, the FCO, BERR, the DTI andUKTI and everybody to be fighting against localcontent requirements, but local content requirementsare a very reasonable thing if you are an oil-producingcountry. Oil production employs very few people, andit employs people with a very narrow set of skills.There are only two ways that you can really turn thatinto a long-term industry: you save the money and useit to develop other industries, or you export oilservices. Texas, where I come from, has almost no oilleft, but it produces lots of oil; it just produces it inother countries, and that has become a growthindustry.There is a real role for the British Governmentinstitutions, particularly for UKTI, BERR and theFCO, to help companies understand that Brazil’s localcontent requirements are not something to fightagainst, that opposing them isn’t a core part of UKforeign policy in Brazil—that, in fact, they are anopportunity for UK companies. They are anopportunity for UK companies to become partnerswith Brazil and an opportunity for UK companies toestablish a base from which to supply the rest of theAmericas; for example, to leverage. It is notable thatwhen Pemex was developing its policy for openingand reorganising the Mexican oil industry last year, itlooked to São Paulo and not to Houston or Aberdeenas a source of expertise. UK companies in São Paulowould be participating in that, and that is anopportunity that you—the UK Government as aninstitution—need to help UK companies to see moreclearly.Neil Atkinson: But there will always be strongcompetition for skilled engineers and engineeringresources from many places around the world. In aprevious role, I worked in a British company offeringconsulting services in the oil refining industry. Findingskilled chemical engineers and other forms of processengineers to work on projects around the world wasextremely difficult—frankly, we were raiding golfcourses to find retired people and bring them back intoplay. There is a very serious point that the oil industryin many parts of it is an ageing industry. Because ithas tended, historically, to be a boom and bustindustry, during the bad periods recruitment dries up,people are fired and they go off into other work, sowhen a boom returns and good days come, there justaren’t enough people to staff projects. Companies arenow roaming the world, looking for people with skills



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 competitionfrom many other countries around the world.Chair: Opportunities.Neil Atkinson: Indeed.

Examination of Witness

Witness: Mark Bishop, Head of Strategy, Co-ordination and Development, International Department, SeriousOrganised Crime Agency, gave evidence.

Chair: I welcome colleagues back from the Division.Welcome, Mr Bishop. I apologise for the fact that weare running a bit late.

Q22 Mike Gapes: Mr Bishop, can you tell ussomething about crime in Brazil? How serious iscrime in Brazil, and how does it compare with othercountries in Latin America?Mark Bishop: We can comment only on the organisedcrime aspect, because that is primarily what we focuson. We collaborate with Brazilian partners to combata range of mutually important organised crime threats,including cocaine-trafficking, cybercrime, financialcrime, people-exploitation and people-trafficking.Brazil is not a significant drug producer. However, itshares borders with key cocaine-producing countries.The 40 large container ports on its coast havecontributed to it becoming a major transit route forcocaine from South America to mainland Europe andAfrica. There is limited intelligence to suggest that itis a direct cocaine threat to the United Kingdom.There is some evidence of commercial consignmentsgoing directly to the UK, but primarily, the key nexuspoints are from Brazil into Europe and Brazil intoWest Africa, which in turn relates to indirect supplyon to the UK from there.

Q23 Mike Gapes: You have talked about the cocaineissue, but I am initially interested in talking aboutcrime overall in Brazil. I understand that it has a highmurder rate and that there is a serious problem withareas of the country where the security level is verylow. Can you comment on that?Mark Bishop: There are, for example, 600-oddfavelas—shanty towns—in Rio de Janeiro. The StateSecretary for public security in Brazil aims to pacifysome of those areas before events such as the WorldCup in 2014. What the Brazilian police do is drive outthe leaders of the criminal gangs through sustainedaction, which they follow with a phase of stabilisation,including education, public health projects andcommunity policing to gain the trust of the area. Thereis some evidence of success in how they do that.

Q24 Mike Gapes: Does that include an active crimeprevention strategy?Mark Bishop: As part of the community policingaspect, there will be a crime prevention angle. Oneother additional problem that we have to touch on isBrazil’s domestic cocaine problem. They have quite asignificant one, second in size only to that of the US.

Chair: Thank you all very much. It is reallyappreciated that you have taken the time to come here.As we have a Division in one minute’s time, I proposeto adjourn until 4.15 pm if there is one vote and 4.25pm if there are two.Sitting suspended for a Division in the House.

That is growing, and it is a particular focus for ourpartners in the Brazilian federal police.

Q25 Mike Gapes: Is that mainly based on importedcocaine?Mark Bishop: It’s cocaine that is routed through thecountry, but a percentage of that is for the internalmarket.

Q26 Mike Gapes: You have referred to the favelas.There have been, as I understand it, attempts in thelast six months or so to have a co-ordinated clearance,including shoot-outs, and the figure that I saw wasthat 37 people died in the operations. Is that popularwith the public? Is there a public perception that youneed to take a “no holds barred” policy and just getthe places cleaned up?Mark Bishop: This is one that, following BaronessNeville-Jones’ visit, the Home Office examined insome depth, and it will be able to comment in muchmore 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 thinkthat that is my particular area of expertise. That’sabout internal Brazilian activities.

Q28 Mike Gapes: Can I ask you about prisons inBrazil? 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 adiscussion with people dealing with prison policy incertain countries in Latin America, and comparisonswere made between different countries, and I wouldbe interested to know what the perception is of whathappens to people when they are locked up. Is there arehabilitation programme? Is there a diversionprogramme? Or do the prison estate and the prisonpolicy contribute to long-term difficulties?Mark Bishop: As it is not an area of SOCA’scompetence, it would not be right for me to comment,but I am sure that the Home Office would be willingto participate in this, if it has not already been askedto do so.

Q30 Mike Gapes: A final question from me: what isbeing done to combat this problem of cocaine fromBrazil’s neighbours—Colombia, Bolivia, Peru orwherever? Is there co-operation between the Brazilian


27 April 2011 Mark Bishop

authorities and the Governments in thoseneighbouring states, or is it very much a domesticeffort?Mark Bishop: It is a mixture of a number of differentthings: it is a domestic effort and it is Brazil engagingregionally with its partners, particularly Bolivia. Oneof the things that we are trying to get Brazil to engagemore on is engagement further afield in locations suchas Africa, where we think that it can have a realimpact. Certainly, as the Brazilian internal cocaineproblem mounts up or increases, a lot of the Brazilianfederal police’s focus has gone towards that. As partof that focus, they realise that they must engageupstream with their partners, which are Bolivia,Colombia, Venezuela—a transit country to a certainextent—and Peru.

Q31 Mike Gapes: When you say working in Africa,do you mean that the Brazilian authorities willactually send people from their governmentorganisations to work in African countries on apermanent basis?Mark Bishop: Yes, basically. We are looking toencourage them—through things such as EU projects,SEACOP, Ameripol and others that I can go into inmore 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, andBrazil has done some police training, for example, inGuinea-Bissau. There’s an organisation called theComunidade dos Países de Língua Portuguesa whichis 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 moreinvolved in issues that really affect Africa, such asdrug trafficking. In that CPLP, you have Guinea-Bissau, Equatorial Guinea, which is an observer,Angola, Senegal, which is also an observer, CapeVerde, Mozambique, Brazil and Portugal. They are allkey areas for us when it comes to tackling class Adrugs.Mike Gapes: Thank you. That is very helpful.

Q33 Mr Ainsworth: You have given us a flavour ofwhy we are involved in Brazil, and that almost seemsto be mainly drugs and associated activities. In bighandfuls, 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 crimetypes as they affect the United Kingdom, our primaryinterest 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 numberof parts that I mentioned at the start, which includesthings like organised immigration crime and moneylaundering. Cybercrime is a particular area of risingconcern—Brazil is in the top ten list of areas ofconcern for cybercrime. Yes, if you have to break itdown into rough proportions, tackling cocaine iscertainly 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 andwe have a relationship with the Brazilian police thatgoes back the best part of 20 years, both duringSOCA’s time and previously as Her Majesty’sCustoms and Excise. They are a key partner for us,not just in tackling the cocaine that moves to WestAfrica and Europe, but in the influence that they canhave regionally and globally. We have engaged withthem on Project SEACOP and Project Ameripol, twoEU-funded initiatives, to try to tie togetherintelligence flows in relation to South America andWest Africa. There is a lot of work going on to reallystrengthen that co-operation. We are hopeful ofsigning a further memorandum of understanding thisyear with the Justice Minister José Cardozo, aboutwhich the Home Office can provide further detail.We have also undertaken a period of upskilling andcapacity building. This isn’t just about our assets onthe ground; it is about what we can bring to theBrazilian police force. We have facilitated varioustraining courses and rummage courses for vessels,which have shown immediate results. We have gotthem focused on container profiling and port searchesby both federal police and the Brazilian customsservice, with our support. There are undoubtedlyissues coming up—the Brazilian federal police’sbudget has been cut by some 20%, they have fairlysmall numbers, and they are obviously facingconsiderable pressure to tackle the domestic issues inthe run-up to the World Cup and the Olympics.

Q35 Mr Ainsworth: Why is Brazil not a producercountry, when several of its neighbours are?Mark Bishop: I am not an expert coca grower, I thinkit is just not the right climate or the right location forit. There are much more conducive atmospheres. Drugtrafficking, certainly the production side, as we wellknow from our experience in Afghanistan andelsewhere, moves towards the area of least resistancewhen it comes to the level of policing activity. Themost productive outturn you can have in relation to—

Q36 Mr Ainsworth: Brazil is surely not well policedis it? It is a huge country, with massive areas offrontier land.Mark Bishop: There is certainly a very large area topolice. I think when you look at Brazilian police, youhave to look at capacity to undertake investigations,capability to undertake those investigations, andwillingness. Those are the criteria that we normallylook at when talking to and engaging with partners.In comparison with other partners around the world,the Brazilian police force is certainly a key partnerand is well equipped. For example, very few other ofour partners invest in pilotless drones for lawenforcement activity, as they have done. They havetaken possession of three pilotless drones for use inborder drug operations, so there is certainly awillingness to undertake these things. Certainlygeography is going to play its part, because of thesheer size and scale of the country they have to police.



Q37 Mr Ainsworth: The Bolivians threw theAmericans out, and I understand that we are tryingto encourage the Brazilians to give some help to theBolivians. Why would Brazil be more acceptable toBolivia than the Americans?Mark Bishop: There is a certain element of sharedborders and shared interests, and the understandingthat neighbours develop over time. I do not knowwhether one is necessarily more palatable than theother, but when it comes to relationship building, theBolivians appear to have expressed a preference at themoment and the Brazilians should be encouraged todevelop that as much as they can.

Q38 Mr Ainsworth: What is their attitude towardsdrugs? Do they have the same regime as there is hereand in America? Do they believe that the lawenforcement stream is the most important element insuppressing the drug trade and that that field needs tobe chased into the production fields in the way thatBritain certainly buys into?Mark Bishop: I could not comment on how Brazilapproaches its public health issues or anything else.That is not for me. As for law enforcement activity, itis certainly very active, very co-operative and veryeffective, and that works for us.

Q39 Ann Clwyd: You said that you were not anexpert on the favela policy, but I understand that partsof the urban pacification programme are good andparts of it have been criticised by outside bodies.Would it be important for us to visit one of thoseprogrammes to see how the police deal with law andorder and crack down on drugs?Mark Bishop: I understand that a visit is scheduledfor June, in which case I certainly urge you to seewhat our SLO is doing with its respective partners. Iam sure that that can be arranged for you.

Q40 Ann Clwyd: On the point that you were makingabout the police, is there any conflict—as there is inPeru—between the police and the military overcracking down on drugs? In Peru, for example, themilitary seem to have all the resources, while thepolice do not have enough resources so there is a bitof conflict between them. Have you detected that inBrazil?Mark Bishop: Nothing has been commented on in anyway, shape or form by our liaison team there. No.

Q41 Ann Clwyd: Do the police co-operate with themilitary?Mark Bishop: As far as I am aware, the police inBrazil have a number of partners, ranging from theenvironmental police right the way through. Policeand customs work together. I assume that the militaryare on the list of partners, but I cannot say for sure. Iknow that the Brazilian police engage with a numberof partners in their activities.

Q42 Ann Clwyd: Have you had any experience ofthe cracking down on child trafficking, which weknow goes on in Brazil?Mark Bishop: Yes. As part of the work that has beenundertaken, we can touch on two areas. One is the

sexual exploitation of children and the work that hasbeen done by CEOP—the Child Exploitation andOnline Protection team—which probably takes us intothe realms of cybercrime activity. As for the sexualexploitation of children, our liaison teams regularlyreceive intelligence from the Brazilian federal policeon internet child pornography, which has been paidfor and accessed in the United Kingdom. We are thebridge between the CEOP investigators and theBrazilian police force to take it forward.CEOP has said that the relationship works from itspoint of view. What would be useful for us is forCEOP and the UK police forces to provide feedbackon the intelligence from the Brazilians. We areworking towards that to demonstrate to the Brazilianfederal police—its paedophile unit, in particular—thatthe UK is serious about tackling the online threat tochildren, and there have been outcomes from theintelligence that it has worked so hard to obtain.One of the things on which our liaison team has beenworking with CEOP and the Brazilian police isconsidering how best to tackle the emerging threatfrom the growing numbers of European child-sexoffenders who will travel to Brazil in the run-up to theOlympic Games and the World Cup. We have to havea plan in place with the Brazilians to manage thatproperly.

Q43 Rory Stewart: How do your resources comparewith those of the United States, or any of the othermajor players, in engaging Brazil?Mark Bishop: Clearly, our resources are considerablyless than some of our counterpart agencies. The FBI’sbudget last year, for example, was some $7 billion forits 14,000 agents. For our 4,000 agents it wasconsiderably less.

Q44 Rory Stewart: What does that mean in terms ofworking out how you divvy up work in Brazil withother international partners and how you determinehow best to punch above your weight?Mark Bishop: It means that there is, as with all of ourSouth American offices and a great number of ouroffices worldwide, a lot of engagement with agenciessuch as the Drug Enforcement Administration todetermine how best we can come together to sharesome of the burden. It means that we are trying toencourage more and more of our European partners,such as the Bundeskriminalamt and the Spanishnational police, to take some of the burden andcontribute financially. It is also largely about how wellwe can access EU funding to try to corral some ofthose nations together. The two projects I mentionedearlier have gone some way towards that.Equally, there is a considerable element of workingwith partner agencies here in the United Kingdom.The UK Border Agency and Her Majesty’s Revenueand Customs both have overseas networks, and wehave been very effective in getting together andensuring that things are deconflicted properly and thatwe are getting the best bang for our buck.

Q45 Rory Stewart: Will you give us just oneexample of an area that you might not touch, thatmight not make sense in terms of your resources and



that you might leave to a better resourced partner suchas the United States?Mark Bishop: Certainly when it comes to theprovision of extensive material support orcontributions, the United States is much betterresourced. We tend to focus on the provision ofspecialist training that can be cascaded outwards andspecific smaller projects, rather than some of thebigger plans. In Afghanistan and elsewhere, forexample, the United States trained the entire borderpolice force. We certainly wouldn’t do that. We wouldrely on the United States to commit such resources.In the United Kingdom, particularly when it comes tothings such as organised immigration crime, we haveengaged with UKBA,5 which is very much focusedon issues related to overstayers here in the UnitedKingdom, rather than an organised immigration threat.So there is that dialogue and interchange.

Q46 Mr Roy: It is unprecedented for a country to begiven both the FIFA World Cup and the OlympicGames in a two-year period. Presumably the chancesfor organised crime will be greatly increased with themany thousands of people from this country who willgo to the World Cup. There probably won’t be toomany from my country, actually, but the chances arethat there will be many thousands of people goingacross for the World Cup. From an organised crimepoint of view, it is a dry run for the Olympic Gamestwo years later. How have our authorities affected thedebate on what will happen during that two-yearperiod?Mark Bishop: We have already contributed to theUK’s assistance to Brazil’s preparations for both thoseevents. Cyber-security is part of the Olympic securitystrategy. There are lessons that we can impart to theBrazilians on the issues that we’ve picked up on theOlympic Games. We’ve been able to facilitate contactbetween the Brazilian federal police and itsMetropolitan police counterpart, which is in charge ofpolicing our Olympics, to try to ensure that as manylessons are being learned as possible. I am sure thatthe Metropolitan police will be delighted to providefurther information on Olympic preparations that ithas undertaken.

Q47 Mr Roy: So do we expect large numbers ofBrazilian authorities to be in London during theOlympic Games?Mark Bishop: I understand so, yes.

Q48 Mike Gapes: In your answer to Rory Stewartyou referred to a figure of 4,000 personnel. Can youclarify that that is your total SOCA employees?Mark Bishop: It is.

Q49 Mike Gapes: How many of those are in Braziland how many are in Latin America?Mark Bishop: We have two in Brazil. I would haveto come back to you with the total number in LatinAmerica, unless we can do a quick bit of maths behindme. I wouldn’t imagine it is more than 20, but we cancertainly write to you with the exact number.6

5 UK Border Agency.6 See Ev 53.

Q50 Mike Gapes: In addition, presumably, fromtime to time you have people going backwards andforwards.Mark Bishop: Yes, absolutely.

Q51 Mike Gapes: In your priority countries—if youhave such a thing—in the region, is Brazil the No. 1country that you work with or does Colombia comeup the scale?Mark Bishop: Certainly, Colombia comes up thescale. I don’t think we can ever really clarify it just interms of a league table, if you like, because as I’vesaid for cybercrime, Brazil would be at the top.7

For cocaine trafficking, Colombia would be at the top,probably followed by Peru and Bolivia, wherecertainly we are starting to see much more productiontaking place.

Q52 Mike Gapes: What about for things such asmoney laundering and financial crime? Is that moreconcentrated in some of the countries in CentralAmerica and the Caribbean?Mark Bishop: Certainly, we are getting moreconcentration of that in locations such as Panama.There is a threat to the United Kingdom from moneylaundering in Brazil but it is currently assessed to below. We are seeing some evidence of organised crimegroups buying property in the north-east of Brazil, inorder to launder the proceeds of their crimes, butBrazil has become less attractive to money launderersthan it was two to three years ago. As the value of thepound, the euro and the dollar has diminished, theBrazilian real has increased; I think it is about 2.5:1now.

Q53 Mr Watts: You seemed to indicate that Brazilwas perhaps at the forefront in Latin America oftrying to defeat or frustrate the drug traffickers. Is thatmotivated by its own self-interest? Is there a growingdrug problem in Brazil that is leading it to be soforthright in its opposition to the trade?Mark Bishop: There is certainly a growing internalconsumption problem of cocaine within Brazil. A lotof Brazilian federal police resources, as they will nodoubt tell you when you go, have been focusedtowards tackling this. Indeed, they have their ownversion of what we tried to do, namely to tackle itupstream, hence the engagement with Bolivia andothers to try and get more towards the source of theproblem.So yes, as with our relationships worldwide, there isalways that element of self-interest, and this is perhapswhere we get into the realms of this phrase that seemsto be doing the rounds about law enforcementdiplomacy. We may not agree with a lot of countrieson territorial, nuclear or other issues, but if you turnup as a law enforcement officer and say to just aboutany nation, “Would you like to work together on drugsand crime?” the answer will be yes. It is one of thoseuncontentious areas, if you like.

7 Note by witness: SOCA does not have a league table or listof countries in priority order. Brazil is one of a group of 10countries of concern in relation to cybercrime.



Q54 Mr Roy: Isn’t there a danger that the more wetackle the drugs and the cartels in Colombia, Peru andBolivia, as we get more success we are actuallymoving the problem? The problem then moves to abigger country, such as Brazil.Mark Bishop: There has been, for example, notabledisplacement of the key parts of the cocaine tradefrom Colombia, and indeed some of the key traffickershave found the going so hard in Colombia they havemoved away to other locations. The production ofcocaine we’ve seen increase in Peru and Bolivia as aresult of this. This, in turn, increases the risk ofdomestic trade within Brazil.Success in tackling the drugs trade upstream has madeit more difficult for criminals to operate overall. That’sone of the central principles on which we operate. Asfar as the UK goes, for example, this has beenevidenced by a sustained low availability for high-purity cocaine in the United Kingdom since early2009, with wholesale per kg prices at anunprecedented high. So yes, it does displace it, but wesee real effect, certainly from the UK’s efforts.Certainly we see real effect with other partners wherewe have invested a lot of time, money and effort, such


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 theWWF: David Norman, the Director of Campaigns,and Sandra Charity, the Head of Forest Programmes.I welcome you both and apologise for the delay in theprogramme. As we are running late, if you don’t mind,we will try to truncate this slightly, but we want togive you a good opportunity to say your bit. Thequestioning will be led by Rory Stewart. I don’t knowwhether 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 somepositive statements about Brazil and the environment.The Foreign Office stated that Brazil is on track toachieve targets of reducing deforestation by 80%. TheCouncil on Foreign Relations says, “Climate changehas become an area where Brazil has turned its clean-energy and environmental bona fides into a significantinternational voice” and that Brazilians are “the mostenvironmentally concerned citizens in the world.”What would you say about all these positive noisescoming out about Brazilian action on theenvironment?David Norman: The WWF supports that. Our senseis that Brazil is a positive partner in many areas onthe environment. Not only does it have a critical setof environmental assets, but it is putting itself on theline in several international forums in trying to makea difference there; perhaps we could come into moredetail on climate change. It is bridging the dividebetween the traditional bloc of developing countries,and the G77 and the developed countries. In theCopenhagen climate summit, it put its own targets on

as Colombia. Inevitably there is that element ofsqueezing a balloon, but it is about being ready forwhere it pops up next.

Q55 Mr Roy: But isn’t there a chance that thedisplacement goes east towards Brazil instead of thewestern side of South America? Therefore you areopening up the UK as a market.Mark Bishop: As we said, there is not really anelement of direct interaction between Brazil and theUK. For us that has also been about building up whatwe do in West Africa and Europe to tackle thatmarket. Thus, for example, we have been able to havea real impact against Serbian organised criminals, whowere bringing cocaine from Brazil into mainlandEurope. From there, some of the points on mainlandEurope were clearly a hub for onward distribution tothe United Kingdom. So if we can have an impactthere, clearly, as the figures show, we are having animpact on the United Kingdom.Chair: Mr Bishop, thank you very much indeed. Weare going to draw stumps there, and we reallyappreciate your taking the time to come to talk to us.It was very helpful. Thank you.

the table, quite explicitly, for a reduction of emissionsagainst business as usual—36% to 39%. They are veryfirm targets, and were quite important in moving onthe negotiations.The rationale behind that was very much one ofleadership. It was in a sense saying, “We will do thisanyway, whatever other countries do.” This is prettyimportant. It already has a pretty clean energy mix,with significant hydropower and biofuel resources. Ithas a strong scientific community and forestmonitoring capacity. As you pointed out, it is alreadymaking progress on its Amazon targets. So yes, weare very supportive of that.

Q58 Rory Stewart: Is there another side to this,particularly on the Amazon? Is there another side ofthe coin?Sandra Charity: One issue that has been important,from the years when the Amazon was being clearedvery aggressively, is the change in policy—forexample, much more focus on sustainable timberproduction. WWF Brazil has launched and is nowdeveloping the criteria for sustainability standards forsome of the main commodities exported by Brazil—for example, soy—and the Government are workingvery much with civil society to address the issues onsustainability standards. It is no longer just a focus on,“Let’s set up protected areas in the Amazon and havea belt of pristine forest that is untouchable”; it islooking at areas of sustainable development wherethey can lead and make a difference. Soy is onecurrent example.


27 April 2011 David Norman and Sandra Charity

Q59 Rory Stewart: Are there things that you thinkthe UK or the Foreign Office should be doing to help,support or in any way facilitate the Braziliangovernment’s efforts?Sandra Charity: Our experience is that the ForeignOffice has been and is already playing an importantrole. The recent visit by Caroline Spelman to Brazil,about two or three weeks ago, was an example of thesorts of things that the Foreign Office can continue todo. The support that the FCO is going to provide orthat DEFRA is going to provide to sustainability andbiodiversity dialogues in Brazil is going to beinstrumental. That was welcomed by the BrazilianMinister of the Environment, and the 48 hours thatCaroline Spelman spent in Brasília, which included avisit to the Cerrado, Brazil’s second-largest and less-famous biome, were very important for what Brazil istrying to do. It was very much an invite from theBrazilian government, and I think that is the way togo.

Q60 Rory Stewart: Broadly speaking, you areconfirming the rather positive impression that we aregetting of both the Brazilian government’s initiativeson the environment and the UK Government’sinitiatives on supporting the Brazilian government’sinitiatives on the environment. May I give you anopportunity to say whether there are any warningnotes, cautions, negative elements or things that pushagainst that narrative that you would like us to beaware of?David Norman: We can pick up the soya story in alittle more detail. Arguably, the link between the UKand Brazil on soya is one of the fundamentalenvironmental links, so you might be familiar withthis. Soya production has doubled globally since themid-1990s, which is almost entirely about feedingchange in diets towards greater meat production, so80% of this soya is going towards feeding livestock,particularly chickens and pigs, but also otherlivestock. This is an explosion, and this is veryimportant in Brazil.It is driving, in particular, the destruction of theCerrado. Everyone knows about the Amazon, and theexisting success of the trajectory in terms ofdeforestation in the Amazon is already very good andon track to meet Brazil’s own targets, but if you lookat the Cerrado, many people have not heard about it.When Caroline Spelman shone a spotlight on thatearlier this month, that was very welcome becausepeople do not know of this Brazilian savannah, butit is responsible for about 5% of the entire globe’sbiodiversity. The greenhouse gas emissions caused byland use change in the Cerrado have now overtakenthose of the Amazon. It is not monitored as well asthe Amazon, but these are dramatic land use changes,which have biodiversity impacts as well.It is not straightforward to offer recommendations ofwhat Governments should do differently. This is aboutmarket action and a change in global diets, but WWFhas pressed particularly for recognition that theenvironmental impacts of soya production in Brazilare absolutely critical. For example, a certificationstandard 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 formof certification that retailers can sign up to, is again away to make sure that soya that is imported into thiscountry is not causing deforestation, for example.Sandra Charity: One thing to add is that the UK cancontinue to play, or play a stronger, role inencouraging other European countries, given that theUK operates as a bloc in many of the internationalconventions such as the Convention on BiologicalDiversity and the UNFCCC.8 The UK can play abigger role. Just to go back to the soy example, Chinais the biggest importer of soy worldwide, but the EUis the second biggest importer, so it is important forthe UK to continue to work with other importingcountries in the EU to make a difference. If the UKor other countries were to reduce consumption orimports of soy, all that soy would still go to China inany case, so there is a role for the UK both with theEU, but also working closely with China, which isthe major pull and the major driver of soy productionin Brazil.

Q61 Mr Ainsworth: We are told that Brazilians aretold at a very young age that they own the Amazon,so there is a certain prickliness regarding internationalorganisations working in Brazil on conservationissues. How have you found that? Does that not makeit difficult for organisations such as yours to work inBrazil, or are things getting better? What is thesituation with the tension between the internationaldesire to own the problem of the Amazon and Brazil’sstated and actual ownership of it?Sandra Charity: I think that assertion is correct fromsome time ago. The military regime has only been outfor 30 years, which, comparatively, is not a very longtime, and this is something that will take a generationto change. I think Brazilians do like to feel that theycontrol the Brazilian Amazon and that they havesovereignty over their part of the Amazon, but withthe economic boom in Brazil, they have become muchmore open to international interest when it is genuine.We often witness that through the variousinternational negotiations on things like climatechange and the CBD.9 For example, the last CBDin Nagoya had a strong focus on access and benefitsharing, which is potentially an area of tension,because, obviously, it includes patents and rights overgenetic resources and so on, which is an example ofwhere things could get sensitive, but Brazil is playinga more open game, at least in the view of WWF.10

We feel that, internationally, Brazil is trying to presentitself as having a more modern, more progressiveangle on the environment. Yes, I think that is thetrend.

Q62 Mr Ainsworth: You said something aboutbiofuel possibly being part of Brazil’s policy. Is therenot a downside to that? Brazil is the world’s largestproducer of sugarcane ethanol, and there must be8 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 Boardof Trustees which is recognised by the Brazilian governmentas such.



some land use and biodiversity issues. There must beanother side to that, although it might be viewed asbroadly positive.David Norman: There certainly is a potentialdownside. WWF’s starting point, if you look at ourenergy report from the start of this year, is that if youare serious about major emissions reductions globally,biofuels are quite an important part of that. We are notin the camp that says biofuels are inherently a badthing. The issue is about setting standards that actuallyhave traction in terms of the social and environmentalpotential impacts. The question is whether biofuels aregenuinely beneficial in carbon terms. All sorts ofbiofuels, starting with maize-based biofuels in theUnited States, are absolutely not good for theenvironment: clearly, in terms of full life-cycle carbonaccounting, they are very bad. WWF in Brazil did areport three years ago that looked at this in terms ofethanol from Brazilian sugarcane. It found thatBrazil’s ethanol from sugarcane is probably the mostefficient biofuel on the planet at the moment, whichis a good starting point, but still, in terms ofexpansion, there is a need to look very carefully atthe social and environmental impacts, particularly thesocial impacts. There will be dramatic changes inemployment, for example, from traditional family-based farming, which is all year round labour, tohighly seasonal labour, in which jobs are availableonly at planting and harvesting times.The environmental impacts are exactly as you said.There is a potential impact on deforestation, but evenin the early dramatic expansion of sugarcane, ourreport suggested that this did not have very muchdirect deforestation impact. The critical thing, and themost difficult to control, is the displacement effect onother forms of farming, which can be displaced toother forested areas. Yes, it is absolutely essential toget it right, but we are involved in the development ofthe Round Table on Responsible Biofuels. The point isexactly to do this—to work with industry to set clearstandards that are capable of biting, and making surethat when we import those biofuels, we can haveconfidence that they do not have the negative impactsthat are potentially there, even in Brazil.

Q63 Mr Watts: You said that Brazil has made a lotof progress in environmental terms over the last fewyears. How much scope is there for it being a forcefor good among its neighbours? Is that something thatinterests Brazil, or is it completely nationalistic inlooking at individual environmental problems?David Norman: On the global stage, it has alreadyplayed a pretty important role. If you look at Brazil,South Africa, India and China in terms of their powerwithin the G77 in the climate negotiations, certainlyBrazil and perhaps South Africa played a reallyimportant role in trying to bridge that divide, beingprepared to say, “We also have a responsibility forsetting targets, for making emissions reductions”, andputting that on the table up front. That has brokenthrough some of the impasse of saying that until thedeveloped world had done everything, nothing wasgoing to be done by the developing world. That hasbeen tremendously helpful.

I think there is also a partnership role in relation toforest monitoring. Brazil has very strong scientificcommunity. Part of its success in reducingdeforestation in the Amazon is based on highlysophisticated methods for tracking it and respondingto continued deforestation. Again, that looks liketechnology that can be shared. In regional terms?Sandra Charity: Brazil is currently the main funderof many of the infrastructure projects in othercountries, such as roads and dams—possibly morethan the Inter-American Development Bank or theWorld Bank, for example. It is already playing astrong regional role in promoting development andlending. Importantly from the environmental point ofview, it is also keen to incorporate environmentalstandards in its lending policies so as to avoid, let ussay, the most impacting projects. It is not always allrosy. The WWF is working with a number of bilateralsand the World Bank, so that they and the Brazilianbanks are tightening up their sustainability criteria forlending. Obviously soya is a big economic driver inneighbouring countries such as Bolivia and Paraguay.From the environmental point of view, we are verykeen to have more of a regional approach. Thatapproach is being promoted by the Brazilian Ministryof the Environment, and it is something that thecurrent Minister of the Environment has discussedwith Caroline Spelman.Let us not worry only about Brazil; we must also thinkabout the other eight countries that share the Amazonbasin with Brazil. Although Brazil has 60% of theAmazon basin, there is another 40% covered by theother eight. Taking a regional approach is very muchsomething that we would promote, and we wouldencourage this Government and other Governments todo so as well. We feel that Rio+20, which will happenin June next year in Rio in Brazil, is an opportunityto promote this regional approach, rather than anationalistic approach on a country-by-country basis.At the end of the day, biodiversity and forestconservation and sustainable development depend ona more integrated collaborative approach.As we were saying, there is a lot of South-Southtransfer of technology between Brazil and othercountries, not in only satellite imagery technology butin other aspects of productivity improvement—of soy,for example and other agricultural and commodity-type economic drivers.

Q64 Mike Gapes: You touched in passing on theCopenhagen negotiations and said that Brazil playedan important role in those. I am interested to knowhow influential Brazil is, given that on foreign policyit has a traditionalist, non-interference to othercountries’ internal affairs approach. I am not going togo there, but it abstained in the vote on Libya in theSecurity Council, for example. Do you think that thatis changing on some issues, particularly climate-related ones, and that that will have a knock-onconsequence, as Brazil sees itself playing a greaterrole in the world as a member—temporarily at themoment, but with aspirations to be a permanentmember—of the Security Council?David Norman: That is right. Because of Brazil’smoral authority on deforestation issues and its having



a pretty clean electricity sector, it is in a positionwhere others are potentially swayed by its arguments.It is looked up to within the G77, so it already playsquite a significant role.Also, it is partly down to the creativity of itsnegotiators in those UNFCCC negotiations. Forexample, the CDM—the clean developmentmechanism—under Kyoto came out of an idea fromBrazil—we are going that far back. Because Brazilhas been so closely identified from the outset with theclimate change issue, in the context of thosenegotiations, it has already been and continues to bea positive force. That speech by the then PresidentLula in Copenhagen was critical. He was the firstperson I had seen who had put down an explicitstatement on the targets. He said, “Brazil hasn’t comehere to bargain. These targets don’t need externalmoney. We will do this with our resources.” That waspretty powerful because it was very different fromwhat other major economies were saying at the time.

Q65 Chair: Thank you very much. You haveexhausted our questions, but do you think that wehave covered everything?David Norman: Can we touch on the financing forreduced emissions from deforestation and forestdegradation, which might be significant? There is aworking assumption from the UK that not muchmoney should go to countries such as Brazil that aregrowing strongly and are emerging economies thatcould be future economic superpowers. There hasbeen quite important small-scale financing from theFCO on the ground, particularly for bringing togetherdifferent actors such as the Brazilian equivalent of theCBI,11 together with different Ministries, but in termsof significant funds on REDD,12 this could be11 Confederation of British Industry.12 Reducing Emissions from Deforestation and Forest

Degradation.

important and WWF’s view is that Brazil, as such aconstructive partner, with a track record of spendingthat sort of money in a very effective way, provingthat it is delivering global benefits in reducingdeforestation and its associated emissions, shouldcertainly be looked at.Again, we are at a stage in developmentinternationally where there is still a lot to be workedout. It is critical that that sort of financing also hassome of the safeguards that we touched on in relationto biofuels—for example, a naïve approach, focusednarrowly on carbon, could easily end up incentivisingthe shift away from natural forests, which aretremendously important not only in carbon terms butin biodiversity terms, towards plantations. That wouldbe a disaster. This is a word of enthusiasm in terms ofthe potential for Brazil to spend that sort of moneyeffectively, and of caution in terms of requiring thekind of standards to make sure that the money isspent well.Sandra Charity: To add a small point, 15–20% ofglobal greenhouse gas emissions are fromdeforestation. 70% of Brazil’s GHG emissions arefrom deforestation. That indicates how important it isto address the issue of deforestation, which will alsomanage to address a whole range of biodiversity,social and economic issues, if the safeguards are inplace. That is key, and as David said, WWF isstrongly promoting that at the moment. The UKGovernment is still considering the best approach totheir financial commitment to addressing climatechange, so it is important that a proportion of thatgoes for reduced emissions on deforestation and forestdegradation (REDD).Chair: Excellent. Thank you very much indeed. Thatis really appreciated. If we have any further questionson the environment after we have been there andspoken to people, we will come back to you.


Wednesday 11 May 2011

Members present:


Mr John BaronSir Menzies CampbellMike GapesAndrew Rosindell

________________

Witnesses: Nicholas Armour, Director, International Group, UK Trade & Investment, Tony Lamb, LatinAmericas 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 andour witnesses today. This is the second evidencesession of our inquiry into UK-Brazil relations. Weare looking at the Government’s policy on a strongcommercial relationship between the UK and Brazil,and later we will examine the rise of Brazil as aninternational actor on the world stage.Our first three witnesses are Nicholas Armour,director of the International Group, Tony Lamb fromUK Trade & Investment, and Philip Brown from theTrade Policy Unit at BIS. I welcome all three of you,and I will open the bowling. The Government say theywant to increase their exports to Brazil. How will theydo that?Nicholas Armour: To be perfectly honest, I don’tthink the Government will increase exports, butBritish business will do that with as much help asHMG can provide. A new UKTI strategy waslaunched yesterday evening, which will build on oursuccessful track record to help to boost exports toBrazil over the years. As you know, Brazil is adesignated high-growth market for UKTI, and weattack those markets through a programme of businessactivities—in this case, in both the UK and Brazil—to try to get business to take part in the undoubtedgrowth in a BRIC country. It is a BRIC for no otherreason than it is a high-growth market.We have a series of high-value opportunities that wehave identified from around 60 throughout the world.There are eight in Brazil that we feel are ready forsystematic exploitation, and where there is a reallygood opportunity for UK companies to win significantbusiness. Some of them obviously have a competitiveinterest there. The Petrobras investment programme isof critical importance, and the 2016 Rio Olympics,associated with the 2014 World Cup, present a widerange of business opportunities.We are setting up some virtual project teams to ensurethat we extract the maximum benefit for UKcompanies, where UK capability exists to meet therequirements. We expect an increasing number ofministerial visits to Brazil, and visits from people suchas yourselves to build up Brazil as a normaldestination for Britons to go to, whether on businessor not, and to build up a relationship of yes, this is aplace where we need to go and to be seen, and in afunny sort of way to make Brazil fashionable, whichmeans that it is a place that people go to not just fortourism, culture, education and so on, but because it’sa place to do good business. As with all high-growthmarkets, the projected GDP growth is substantially

Mr Frank RoySir John StanleyRory StewartMr Dave Watts

higher than we are experiencing in the developedworld at the moment, so it’s a good place to go to ata time when other economies are slightly flat. TheFCO’s commercial diplomacy programme fund willallow for a series of projects to be organised in Brazil.Along with the UKTI strategy announced last night,the Foreign Secretary announced the charter forbusiness that the FCO is launching. It encapsulates thepolicy over there—I say “over there”, because UKTIis of course an integral part of both the FCO andBIS—that with increasing ministerial visits andcontact with Ministers from foreign countries acrossthe board, everyone, whatever their portfolio, shouldhave the latest on what business and what commercialopportunities we are trying to exploit for UKcompanies with that country so that we can seizeevery sensible opportunity to push that.

Q67 Chair: Can any extra help be given? Should webe coaching businesses? Are the ministerial visitsuseful? You briefly touched on ministerial visits andsaid that they were altering the culture slightly. TheLord Mayor is going. Is that useful? Do you think thatwe are on the right track at the moment?Nicholas Armour: I do, for the simple reason thattraditionally Latin America has been under-visited bysignificant Britons. If you will allow me a slightmoment of cynicism, normally a Prime Minister willgo and declare Latin America to be discovered andthen that is the last time they can go. That happensfor very understandable reasons—it is quite a longway away. The fact that we have had a fairly sustainedprogramme of ministerial and high-level visits, suchas yours, over the past two or three years andestablished the Joint Economic and Trade Committeeback in 2007 to take forward that element shows thatthere is a growing commitment.It is not enough just to visit, because we have toachieve something at the end of it. It is fine, andBrazilians like receiving visitors, because theyunderstand the importance of it. They understand theimportance of the Foreign Secretary’s Canning Housespeech and putting Latin America there. LatinAmericans generally will take heart from the networkshift that is putting more resources particularly aroundthe prosperity agenda, which the Foreign Secretaryannounced in the House this morning. There isdemonstrable interest in Latin America, with Brazilvery much within that, and we must now put thesubstance there.


11 May 2011 Nicholas Armour, Tony Lamb and Philip Brown

Visits like yours tout British excellence not only toattract inward investment, but the excellence of theproduct that we have to offer and that the countryshould be buying. To all intents and purposes, Brazilis a developed nation. It has huge middle-class andconsumer purchasing power that is probably largerthan in the United Kingdom. We jolly well ought tobe selling into that, at least at the levels that we exportto the rest of the world.

Q68 Chair: As for the Government’s pledge to worktowards 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 Imay.Philip Brown: The state of play is that it wasrelaunched in May last year having been suspended in2004. We have just had the fifth round, but we havenot had a read-out of that yet. Negotiations are notmoving forward that quickly. Normally, a free tradeagreement takes a few years to negotiate. Forexample, we hope to conclude the India one this year,and it is nearly four years old already, so we cannotexpect progress too quickly.At the moment, there are a number of sensitivitiesaround a trade agreement with the Mercosur region.Agriculturally, the EU is incredibly defensive.Mercosur is the most competitive exporter in many ofthe most sensitive areas, such as beef, poultry anddairy. One of the challenges in the free tradeagreement is whether the EU itself can come up witha good enough offer. The European Commission hasjust released a preliminary impact assessment showingthat some harm would be done to particular sectors incertain countries, which means that we are at adifficult point in the EU. Because of the appreciationof the real and a number of structural issues, Mercosuritself, particularly Brazil, is quite sensitive on theindustrial sector, in particular. There is protectionistinterest, too.As for the progress of the negotiations, a lot of workhas been done on the rules. There is already a platformto build on from where we were in 2004. There hasnot been an exchange of offers yet. An exchange ofoffers is subject to further EU consideration withparticular concerns from some about the agriculturalimpact. Brazil and the other Mercosur countries needto go through their own processes.As for the prospects, the European Commission hadan aspiration on concluding the Round this year,which will simply not happen. Realistically, the endof next year will see a good outcome in concludingthe Round. Once we have a deal that is concluded, wethen typically have about another 18 months beforethe various procedures are gone through and comeinto force. On that basis, I guess that we would belooking at 2014 as a realistic deadline.

Q69 Rory Stewart: To follow up on that, there willclearly be advantages for the UK’s economy from thefree trade agreement, but can you talk a little about thepotential negative impacts on the agricultural sector?Philip Brown: The preliminary analysis has just comeout. We have had a look at it, and we have gone backto the Commission. Our Minister, Edward Davey, will

be saying the same when he goes to the ForeignAffairs Council on Friday—that we need to do a fullanalysis of it. The initial indication is that the beefsector is the biggest area that would be affected. Thatmeans that northern Scotland and Wales are two areasthat this would affect. The overall initial analysis—asI have said, it is just a preliminary analysis at thispoint—shows overall net gains across the majority ofsectors for Europe.

Q70 Rory Stewart: Which sectors predominantly?Philip Brown: For the gains?Rory Stewart: Yes.Philip Brown: On the agricultural side, we wouldexpect it to be the more process side, rather than theraw 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 anddrink exports; it is one of the most effective lobbygroups that we speak to. It is very keen on this FTAin terms of the opportunities that it will create for itsmembers, particularly in the Brazilian market. It willmainly be in industrial sectors, though, that we benefitmost. 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 mainexports at the moment, pharmaceuticals is a big one.That will be very good for UK industry. There is someheavy industry as well, and chemicals; they are someof the top export areas. There is also the serviceindustry. At the moment, we have quite a lot of UKinvestment there. Lloyd’s, for example, is very keen toget the playing field levelled on some of the regulatoryissues around insurance and reinsurance. We wouldalso look for liberalisation and market opportunitieson legal services, accountancy and financial servicesmore broadly.

Q71 Sir Menzies Campbell: I wonder whether Imight go back to the generality of the approach. Therehas always been a sort of sense that the Americas fellwithin the backyard of the United States—that is notvery geographically accurate, but it is politicallyaccurate. As you have described, this is a market ofenormous potential. Will we find ourselves, as it were,in rivalry with the United States? If so, will there beany political fallout from that?Nicholas Armour: I will ask Tony Lamb to addanything if he wants to, but I will just say to start withthat, in my limited experience of dealing with LatinAmerica, and I come relatively fresh to this, thefurther south you go in the hemisphere, the less thereis a pervasive American culture. Once you get beyondColumbia, it is the case that our European partners,particularly the Spaniards and so on, are ourcompetitors in investing in those economies.Particularly in Brazil, we really do quite well, largelyon the back of the oil and gas sectors—the energysectors. BG’s investment in pre-sal oil exploration andso on is the largest such investment in Brazil. Theremay be limited sectors, but we are quite big in termsof that. Down that far, the Americans are not too muchof an issue.



Tony Lamb: To pick up on that, the Brazilians andLatin American countries in general are looking moreand more at opportunities in Europe, and they seeopportunities in European markets. BNDES, theBrazilian national development bank, opened its firstoverseas office here in London two years ago, whichwill present opportunities for UK companies to investin Brazil and for Brazilian investment here in the UK.I do not feel that we will have any major problemswith our relationships with the Americans in terms ofour expanding trade into Latin America.

Q72 Sir Menzies Campbell: But there will be othersseeking to capitalise on this emerging economy—Isuppose you would call it an emergent economy,rather than an emerging one. The competition may bepretty fierce.Nicholas Armour: They used to say that the city inthe world with the largest number of workersemployed by German firms was São Paulo—that isthe sort of level; it is ahead of any German city. But,then, it is a city of about 23 million. So, yes. We werehugely big in Latin America; we built the railwaysand all that sort of thing. Then we disinvestedsubstantially to pay for the Second World War, andwe 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 isthe year I have the latest figures for, were medicaland pharmaceutical products, chemical materials andproducts, iron and steel, organic chemicals, andpower-generating machinery and equipment, whichsupports Philip’s view of the sorts of things that weare doing. Therefore, we will be happier to see lowertariffs.Philip Brown: Let me quickly add on free tradeagreements from the perspective of where that standswith the US. One of the advantages of this particularfree trade agreement is that no major developedcountry, including the US, has an ambitious tradeagreement with the Mercosur area. So, this is one ofthe few times where this will give the EU trulypreferential access to what is quite a closed market. Ifwe can get this one moving, we can get a head starton others there.

Q73 Chair: How closely are UKTI and thediplomatic staff working on this? How integrated arethey?Nicholas Armour: Totally, I suppose.Chair: After today’s statement, that is what I wouldexpect you to say.Nicholas Armour: Not only because I joined thediplomatic service 36 and a half years ago and I amstill in it, although I run things in UKTI on and off—Chair: Congratulations.Nicholas Armour: Thank you very much. There isone other member of my intake left, but three of usare dead. I think in London it is rather odd. We areall in Whitehall, but with the physical separation ofbuildings you end up working in your silos. For mostof us, the experience is that posts overseas are muchmore integrated than London gives them credit for.

Q74 Chair: How many of the UKTI team in Brazilspeak Portuguese?Nicholas Armour: Almost all of them, because mostof them are locally engaged Brazilians. Certainly, thedirector of UKTI in Brazil is married to a Brazilian.So is his deputy. His partner is also Brazilian and heserved in Lisbon before. The head of our team in Riois married to a Brazilian.

Q75 Chair: So there are good geographicalknowledge and language skills, which is what we arequite keen on in this Committee.Nicholas Armour: Correct. I am fully behind theForeign Secretary’s statement today.Chair: Moving on now to the trade relationships.Rory.

Q76 Rory Stewart: May I begin by following up alittle bit? There is obviously enormous benefit to UKexporters in this free trade agreement, but they are abit of a threat particularly to things such as theagricultural sector from Brazilian imports. How doyou, as UKTI, balance anxieties in the UK aboutBrazilian imports against your own agenda ofpromoting UK exports to Brazil?Philip Brown: Our starting point for free tradeagreements as the UK is that we generally have anapproach to open markets and we see the benefits ofboth exports and imports. I guess that that is thefundamental starting point. Our overall view of whatwe want to achieve from our side would be, quitesimply, maximum liberalisation possible as quickly aspossible. Clearly, you do not quite get that. We havecertain areas that are most important to us, and wepush hardest on those.Domestically, the European Commission, as I havementioned, has just launched the preliminary impactassessment. It also has a sustainable impactassessment that looks at a slightly wider set of issuesand some development issues. We would look atthose, and we would want those to be taken intoaccount. On the whole, our approach is that in orderto get an ambitious deal there has to be movementfrom both sides. For example, in the agriculturalsector, our DEFRA economists are looking at it now.We will look at the full report and will then make anassessment of the impact and also make an assessmentof how that could be mitigated. For example, you canmitigate it over a long liberalisation period, so you getmuch more time for adjustment. That is probably theoptimum way of doing it, because you still liberalise,but you do it over time. You could also look at othermatters; for example, putting in place quotas, whichagain might restrict the level of impact and mean it iseasier for the UK Government to manage and, in thiscase, for farmers or business.

Q77 Rory Stewart: Thank you. I suppose the otheranxiety about Brazil is that we are at the moment inanother one of these phases of being immenselyoptimistic about the Brazilian economy. In the past150 years, there have been many moments when wewere immensely optimistic. Often that is driven bycommodity prices, both in the past 150 years andindeed if you look at Brazil today. There are elements,



despite all the liberalisation and progress, and somewarning signs that we have an economy hereincreasingly dependent on commodity prices. In fact,were commodity prices lower, they would not berunning a surplus at all; they would be in deficit. Theyare still running a relatively state-led investmentprogramme right the way across Brazil. Are thosethings a concern? Do you have any comments on thestructure of the Brazilian economy—what its potentialdownsides are and what risks it potentially faces?Nicholas Armour: I do not think that any of us, inour current jobs, are economists. The Brazilianeconomy is booming. Undoubtedly, there areopportunities for British companies that we need tobring to their attention. If our normal global tradingrivals are doing successful business there, we shouldbe doing so, too. If I understand the implication ofyour question, you are saying that this bonanza maynot last. We are saying not that you must go herebecause it will last, but here is something that yourcompetitors are taking advantage of and perhaps youought to be too, particularly as markets elsewhere aresomewhat flat. In our formal trade talks, there arealways a lot of issues around market access and so on.As I think I have already said, I came to LatinAmerica relatively late in my career. The one thingthat has always struck me is Brazil is almost entireunto itself. It does not need the rest of the world. Ithas agriculture, resources, very sophisticatedindustrial processes, a large manufacturing base andthe sixth largest aerospace industry—perhaps it isfourth largest. If we all disappeared, it could live onhappily, perhaps with a slight cultural loss. It is reallyup to us to say, “They are going to go on leading livesthe way they are. Let us try to seize the opportunity.”Traditionally, we are a very entrepreneurial nation. Wemay not have the language skills, although our staffthere have, but we should be seizing thoseopportunities. There is a huge middle-class consumerbase that wants the sorts of things that we offer. As itbecomes more sophisticated and opens up to the restof the world, it will want to be a global player, so letus exploit that for what goes with it—the soft powerand the hard sell.

Q78 Rory Stewart: What lessons can be learnedfrom how slow the UK has been to move into theBrazilian market? It was even relatively slow—2007,I think—to begin negotiations on trade barriers.Nicholas Armour: I don’t know. Would somebodyelse like to talk while I think of an answer to thatquestion? I deal with quite a lot of high-growthmarkets. I deal with a broad band from Russia,through Turkey and the Middle East, Africa and LatinAmerica and so on. Logically, therefore, I ought to beable to compute the lessons to a model that will worksuccessfully almost anywhere, but history and theworld is not like that. Each market is, in many ways,sui generis.I mentioned earlier on the question of fashion. I havefound that markets become fashionable—not becauseGovernment makes them so but because businesssuddenly decides that this is the place they need to be.China, which is not my patch, was a fashionablemarket way before anybody actually made any

sensible money there. Why was that so? It just becamethe place that you had to go. In a way, perhaps that iswhat Brazil should become, too. Whether it will bemore successful than some of the other markets, I amafraid that I do not know.

Q79 Rory Stewart: Finally, what are you doing topromote UK agriculture in Brazil? One of the greatskill sets that we have in the United Kingdom is ahighly productive, well-developed agricultural sector.Some of our competitors—Australia, New Zealandand the United States—have been very good atpenetrating markets, especially China. What are wedoing to make sure that British farmers in theagricultural sector are getting in to Brazil and offeringall that we can to promote agriculture in Brazil?Tony Lamb: It is not agricultural, but in 2009 wesigned an agreement with the International Agri-Technology Centre and Embrapa, which is theBrazilian agricultural institute, so there is a formalarrangement in place to promote closer relationshipswithin the sector between the UK and Brazilianindustry. There is activity in place.Nicholas Armour: As Philip said earlier on, we areprobably better in processed foods, including whiskyand so on. What we find with the high-growth marketsthat we are looking at—we structure ourselvessectorally to a certain extent and we have our businessadvisory groups, or whatever they are called under thenew strategy—is that business people from the sectorsay, “These are the five or six countries in the worldwhere we feel that, with the support of UKTI and theGovernment more generally, we as a sector should bemaking a great push.” We have a list somewhere ofwhat those are for Brazil, but agriculture is notamong them.To the extent that our agricultural sector is not sayingthat Brazil is more important for it than some othermarkets, we therefore tend not to say, “But you’vegot it wrong, O agriculture sector.” As you know, theGovernment are very responsive to their businessclients about what they want us to support them indoing. Of course, we will help to lead where we thinkthey are missing some tricks, but if they say, “No, thisis where we want to be,” then fine.Philip Brown: From a free trade perspective, the freetrade agreement—if and when it’s concluded—willeliminate most tariffs on agricultural goods, so theopportunity is there. Free trade agreements also dealwith things such as phyto and cyto-sanitary standardsso, for example, animal food and animal welfarestandards might also be included in that. Those areprohibitive—I don’t know the details of them—inBrazil at the moment. The FTA should help toeliminate those as well.

Q80 Mike Gapes: You mention a number of differentsectors in the economy. Which are the most importantones if our Government is to reach the goal ofdoubling our exports by 2015?Nicholas Armour: I should not have mentionedpriority sectors, because I knew that was going to bethe follow-up question. There are myriad bits andpieces of paper, but I don’t actually seem to have alist of the current ones that we are looking at. I would



say two things: one, to repeat the list of areas wherewe have the highest number of exports; and also, todraw attention to the areas that JETCO1 isspecifically looking at, if I can find the piece ofpaper—could you look for it?—which lists the mainworkstreams.At the moment, the focus is very much on theinfrastructure requirements that both the OlympicGames and the World Cup are going to bring, not justwith getting the stadiums built, but the hugerequirement for airports, the security aspects, thepower that they will need and all that goes with that—the whole aspect of upgrading Brazil’s infrastructureto meet the requirements expected of Games in the21st Century. Did you find that list?Tony Lamb: To add to Nicholas’ point in terms ofthe priority sectors, obviously energy is a top priority.Nicholas mentioned earlier the pre-salt finds that werediscovered just off the coast of Brazil. Certainly,companies such as BG and Shell are looking atopportunities, so there are opportunities for thosecompanies and others in the energy sector.Infrastructure, energy and in and around education aswell are the areas, plus of course financial services,which we will see more and more of with the LordMayor’s visit next month.

Q81 Mike Gapes: On that point about the City ofLondon, is that particularly important and what areyou doing to promote that relationship following theLord Mayor’s visit that you have referred to? GivenLondon’s global role, how big is that in Brazil at themoment and how much bigger can it get?Nicholas Armour: HSBC, for example, has a hugeoperation in Brazil. It is one of its largest and mostprofitable in the world, so it is there. We havementioned before that BNDES chose to set up its firstother hemisphere operation here in London.BOVESPA, its stock exchange, has also set up hereas well, so links are developing. President Lula washere a couple of times over the last 12 to 18 months,largely in the City, pushing that sort of thing. TheLord Mayor is going, as we know, and will take withhim a range of people in the legal, insurance andfinancial services—the sorts of companies that go withLord Mayors.There is so much wealth in Brazil that it isinconceivable that TheCityUK—which, as you know,is set up as a trade association for financial and relatedservices in the UK—should not be exploiting that tothe best of its ability. Sorry to sound a little incoherenton that, but it is so important that there is a separatefinancial sector group that keeps an eye on that. Iknow they are doing that, and that is why the detailsare not quite at my fingertips.Tony Lamb: And Lloyd’s of London has its Brazilianoffice up and running, which is a recent establishmentas well. That is another sign of opportunities for theCity.

Q82 Mike Gapes: Are other countries competitors inthis and trying equally hard, or does London’s globalrole mean that people look to us first? What ishappening with Shanghai, for example? What is1 Joint Economic and Trade Committee.

happening with Hong Kong? Is there a similar interestfrom that part of the world or New York?Nicholas Armour: New York is not too much of aproblem; at least, I have not heard of it in that contextin Brazil, although others will correct me if I havegot that wrong. The preoccupation for Brazil vis-à-visChina is much more about competition for industrialgoods. Part of the reason why I think it has been quitedifficult to get the FTA sorted out is that they are veryworried about what happens if China is able to floodthe Brazilian market with their cheaper industrialgoods and so on. To the extent to which Brazil nowrelies on purchases of its raw materials by China, it isbuilding up a trade relationship with which theBrazilians do not seem entirely comfortable, as it isquite a dominating one. I think that is another reasonwhy they are also looking to aim off a bit bydeveloping their relationship with the EU.

Q83 Mike Gapes: Can I take you back to thequestion of how British business can benefit? Whatabout small and medium enterprises? We have beentold that there is a lot of success in Brazil based onpersonal contacts. Given that British small andmedium enterprises will inevitably be limited in whatthey can do at that level, how can they be assisted byyourselves or others to get into the Brazilian market?Nicholas Armour: The short answer is: withdifficulty, largely, because of its distance and cost.Distance also involves opportunity cost. The longeranswer is that, particularly under the new UKTIstrategy launched yesterday and given that the focusof our current Minister for Trade and Investment,Stephen Green, is very much on the importance ofSMEs to the health of the UK economy, they arefundamental to ensuring that we remain able to payour way in the world. That is the message that herepeats regularly everywhere. We know that SMEsthat export, by necessity become more competitive.Therefore, they are more robust and healthier;therefore, they last longer. SMEs that do not exporthave a much higher incidence of dying. SMEs arecritical.What does that mean in terms of Brazil, which is along way away? It is great if part of a supply chainleads into some of these big infrastructure projects. Itis great if a bespoke-type company has a nicheoperation that Brazilians need or want. I just throw insome circumstantial evidence. We always knockourselves for our inability to speak foreign languagesand so on. That is why we have difficulty sellingaround the world. Somebody—an unproven—pointedout to me that in fact our SMEs are marginally betterthan some of our bigger companies, because they tendto go to countries where they have that personal link:they have married a Brazilian, or they have been onholiday there and met somebody drinking in a bar.“What do you do?” That is how they set up therelationship as an SME. It often starts from that verypersonal relationship, rather than in some of the bigcompanies, which say, “I have a product; I’m goingto come and try to establish a personal relationship onthe back of that.”



Philip Brown: Let me give an example from anotherfree 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—Ithink it was called “100 Business Opportunities forUK Business”. In simple terms, it illustrates what itwould mean in terms of new opportunities, reducedtariffs and opportunities to invest in other sectors. Itwas quite a big launch. It was very much aimed atSMEs, because you tend to find that the bigcompanies—for example, in Brazil you havesomething like £4 billion of investment in thefinancial services sector—can often find ways aroundthe 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 thebuy Brazilian policy from the Brazilian governmentwith regard to the oil industry. What is your reactionto that? What is UKTI’s approach? Are you goingwith the grain, or against it?Nicholas Armour: Both—[Laughter.] If you want toget across the stream to the other side and it’s fast-flowing, you go with the stream and edge across.There will be certain things for which you go with theflow at any given moment, because that is the way todo it. However, we have regular opportunities to speakto the Brazilians, whether in the course of normalbusiness through the ambassadors or on business withMinisters or JETCO. We may say, “You do realise thatthis particular issue is counter to your undertakingswith WTO2 or whatever it is. You do realise thatyou are holding up British interests in doing businessin your country; you say you want it”—and this, thatand the other. There are opportunities to keephammering away and we hope to slow the flow ofcontradictory and harmful currents.

Q85 Mike Gapes: What about British companies co-operating in partnership with Brazilian companies asa best way to deal with the problem?Nicholas Armour: If that is what the business decidesis the best way to deal with it, fantastic. Partnershipstend to work better in life.

Q86 Mike Gapes: One of our witnesses said that thatwas the way forward. Do you encourage that?Nicholas Armour: Yes, absolutely. Part of UKTI’sservices is to help companies to find suitable tradepartners.

Q87 Sir Menzies Campbell: I wanted to ask aboutthe opportunities provided by the Olympic Games andthe World Cup, but to a large extent you haveanswered me, given your emphasis on infrastructure.Nicholas Armour: I have a huge list of things that Icould read out if you want.

Q88 Sir Menzies Campbell: They are quite good atbuilding stadiums, though. I think that Brazil has thelargest football stadium in the world. I suppose thatwe have a good advertisement—a good shopwindow—because our infrastructure is specificallydesigned for the games rather than transport or other2 World Trade Organization.

things, and it has been built on time and withinbudget. Is there any sense that we are trying to sell tothe Brazilian Olympic authorities the expertise thatwent behind it?Nicholas Armour: Very definitely. We have varioushost-to-host agreements, and that seems to be theformat that we had with the British Columbiagovernment for the Vancouver Winter Olympics, withthe Russians for the Sochi Winter Olympics and withthe Brazilians for the Rio Olympics and so on.We are also trying out a new sort of project-focusedapproach in Brazil. There is a laissez-faire attitude inthe British approach to business; everybody piles inand sees what business they can gain. This time round,we are trying to be a little more organised, particularlyin the way that companies call on our services in-country. They say to themselves, “Hey, hang on a bit.There is a mission being organised, by whomever, themonth after next. Why not be part of that?” It is aboutlooking at specific things. We do not think that “cometomorrow without any preparation” is a good idea. Weare trying to give that sort of steer to companieslooking to win business so that it becomes morecoherent. We are moderately confident. The Brazilianstell us that they would much prefer that approach,rather than a whole host of people all trying to call ona few key officials in an unstructured way.In particular, we are also looking at ways for whatwe call the technocratic element, where we want tostrengthen the UK’s positioning in offering things byoffering direct knowledge transfer. We have alreadystarted doing that on the whole question of thesustainability agenda around the London games. Ourorganisers are talking to their organisers, and theirhead, Henrique Meirelles, is coming in a couple ofmonths to see what more they can learn from that. Itis collaborating selling. The technocratic experienceof “We know what we’re doing, this is how you didit, and these are the companies who did it for us andcan do it for you” tries to bring all that together in awhole—I did not want to use the word “holistic”, butI may have to—sort of way.

Q89 Sir Menzies Campbell: In that regard, are yousatisfied with the co-operation that you are gettingfrom the Olympic authorities in this country?Nicholas Armour: Yes is the short answer. We can allbe better human beings and can always have betterco-operation, but, given that they are trying to run theOlympics in just over a year’s time, they understandthe importance of that and it is a collaboration thatworks.

Q90 Mr Watts: Can I push you further on thepartnerships? One of the problems that small andmedium-sized companies will undoubtedly have is thedistance between those and the time to build upnetworks and contacts, if you can find partners wherethey can use their networks and sales teams and soon. How many partnerships have you built up over thepast 12 months? Can you give us some indication?You say that it is one of your priorities.



Nicholas Armour: I am sure that we could find somefigures that we could send to you.3 How reliablethey would be, I don’t know. Companies will come tous and will want their hands held right up to the altarand when the ring is put on the finger. Others willneed, “There’s a church and there’s a good verger totalk to,” and they then say, “Thank you very much,”and that is the last we hear from them until we see inthe equivalent of Hello! magazine that it has been asuccessful marriage. There is a whole range of waysin which one gets involved, so to get the actual figureswould be difficult.This is Tony’s patch, so I will let him say somethingin a moment, but what I would say is that, around theproject approach we are taking to the Olympics,smaller companies that have been supplying into theOlympics here really need, probably, to look at goingwith the sorts of people whom they were working withhere and go with them working in Brazil. That sort ofthing will open the wider door and then the smallerSMEs will come in as part of, I suppose, the supplychain.Tony Lamb: It does not quite answer the question, butin the period between 2006 and 2009, we saw a 500%increase in the number of inquiries being fielded byour colleagues in the UKTI network in Brazil. Inmany respects, they would have led to somerelationships. It underlines the attention that is nowbeing focused on Brazil by companies—large onesand SMEs—here in the UK.

Q91 Mr Watts: Could you send us any details thatyou have? If you are saying that it is a priority andthat it is something that needs to be attended to, itwould be nice to have some information to give us anindication of whether the numbers increasing tell usthat you are being successful or whether there needsto be a bit more of a push in some areas.Tony Lamb: Sure.

Q92 Andrew Rosindell: Obviously, Brazil is a greatopportunity for British business to trade and to workwith in the future, but, of course, British businessneeds to have opportunities that do not posecomplications. Therefore, businesses need an easyway in and they do not want to be bound up inbureaucracy and regulations that prevent businessfrom flourishing. They also need Governments whoare co-operative, as well as security of investment.What are we doing to encourage the Braziliangovernment to get their act together and ensure thatBritish business feels confident to invest in Brazil? Ifwe cannot do that and are not succeeding in that way,how are we helping British business to get aroundsome of these issues?Nicholas Armour: Let me clarify one point. I am notworking hard to encourage British companies to investin Brazil. I am delighted that they do so if it is part ofmaking them a healthy company, and of course theGovernment will work terribly hard to protect3 Note by witness: SME figures, during the period 01/04/2010

and 31/03/2011: 790 companies were offered ServiceDeliveries 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 theBrazilians to do is to buy the products of Britishcompanies, preferably at a profit for those Britishcompanies. Of course, we are trying to attract inwardinvestment, too. I fully accept that as part of sellingyou will need to set up partnerships and localmanufacturing, but my aim is to make Britishcompanies as profitable as possible by selling fineBritish products, goods and services.As you identified, there are a number of issues,particularly in Brazil. The formal process for dealingwith the Brazilians on that is through the JointEconomic & Trade Committee, which has met once ayear since 2007. Dr Cable went over at the end ofAugust last year with a delegation. We are expectingthe Brazilian Development, Industry and ForeignTrade Minister to come back in early September. Themechanisms that we have are the major tradeagreements, which Philip has touched on. If it is atrade policy issue, we have the pressure that we canput on the Brazilians to address market accessconcerns that companies raise with us through the EUand our bilateral mechanisms. We are also willing tooffer advice to individual companies and to supportthem as necessary and as appropriate in lobbying onspecific issues that they may have. As part of theForeign Office’s Prosperity agenda, we are looking ata wider way of helping the Brazilians to build up theircapabilities and capacity in running efficient andeffective customs regulatory regimes and the like,which will make Brazil an easier country andmarketplace with which to deal. By definition, thatwill make it easier for UK companies. Does thatanswer your question?

Q93 Andrew Rosindell: It does. Tell me how youfeel about Brazil as a country. Is it a safe place to dobusiness with, not only in terms of the stability ofthe country—it is a stable country—but in terms ofcorruption? There is a degree of corruption in thecountry still. How are we helping and advising Britishbusinesses in that sense?Nicholas Armour: I will take the macro bit to startand I hope that the others will join, if they want to.The last presidential election was the first for a longtime where whoever won the election was not goingto lead to a huge dip or rise in the economy. To thatextent, Brazil, which always had a fantastic future, hasfinally reached that future. The economic and politicalstability seems to be there.Corruption is a difficult issue. It affects a large numberof markets in which our companies do successfulbusiness. We hope that they manage to stay the rightside of the Bribery Act. Those who deal withcountries where there is a reputation for corruptionneed to tread warily. We are happy, as part of UKTItrade services and with the FCO’s general advice, todiscuss with companies what that may mean in theirparticular circumstances. There is an OverseasSecurity Information for Business website, whichgives access to the sorts of issues that companiesmight face, not only on the bribery and corruptionside, but on the security side more generally as well.Those are the things that businesses need to be aware



of before they embark. That is the service we offer onthe web. It is a difficult issue.

Q94 Chair: Thank you all very much. I am afraid wehave to move on. Thank you for the efforts you aremaking on behalf of Great Britain.Nicholas Armour: Not at all. Let’s just hope thatBritish companies make the best of it, because that is


Witnesses: Professor Andrew Hurrell, Montague Burton Professor of International Relations, University ofOxford, 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 Brazilon the international stage. I am delighted to welcomeProfessor Andrew Hurrell from Balliol College,Oxford, and Dr Marieke Riethof from the Universityof 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 untiltoday, so it is not a co-ordinated response.Let me open the bowling by asking, how important aplayer is Brazil on the world stage? Is it becomingincreasingly influential?Dr Riethof: Brazil is a growing and boomingeconomy, as was discussed in the previous session, soI will not elaborate too much on that. Apart from theeconomic importance of Brazil, it is also a regionaland international player. Regionally, it isstrengthening relations with neighbouring countriesand promoting regional integration, not justeconomically but politically. It uses that regionalintegration to promote its own global role.Globally, Brazil’s economic importance is crucial, butit is trying in various other ways to establish itsinternational reputation. In part, that happens throughBrazil’s focus on multilateralism. It prefers to conductglobal policies through multilateral organisations likethe UN. It also has an extensive range of relations—formal and informal—with countries around theworld. In that sense, Brazil’s foreign policy is focusedon establishing and strengthening south-southrelations in various regions. It is building on relationswith developed countries—the US, Europeancountries and Japan—while strengthening its regionalimportance, using that together with its global role topromote its international foreign policies.Professor Hurrell: I would add a few points abouthow we have come to see Brazil. For some people,Brazil has come out, not of nowhere, but has emergedvery suddenly. There are a number of aspects to that.A previous witness talked about Brazil as a countryclosed unto itself. There has been a long tradition ofBrazil being quite inwardly focused and tied to aforeign policy that has traditionally been quite low-key, reticent and pragmatic. The move into the yearsof President Lula—this very activist, personalist,voluntarist and ambitious foreign policy—is adramatic move, and it affects how we see Brazil,

the satisfaction in the job. I hope that you find yourvisit useful and that it adds to the access Britishcompanies will get.Chair: We are much looking forward to it. Thank youfor coming along and briefing us on what is going on.

perhaps underplaying, for example, the extent towhich Brazilian activism had been growing. In the1990s, it was developing as a major player in, say, thedispute settlement mechanism of the WTO. That isone side.Secondly, there has been huge ignorance about Brazilin many places—the United States as well as Europe.If it does not come from nowhere, it comes against abackdrop of patchy knowledge of Brazil. An earlierwitness talked about making Brazil fashionable.Brazil has become much more fashionable in culture,media and music, but in terms of knowledge, mediapresence and exposure, and academic time andattention, there is much less certainty. The last areastudies rethink in UK higher education left out LatinAmerica. Within Latin America, there is always aquestion about where Brazil fits. So we have a bigproblem in terms of what we know and the number ofpeople who have a knowledge about Brazil.Those are the points I would make about where wehave come from. Obviously, there are the areas wehave just heard about—those areas where Brazil hasnow come on to the stage as a very dynamic player.It is active and in many areas it is what one might calla veto player; things cannot happen without it. Realquestions regarding where it is going and how muchit has achieved are very live issues.

Q96 Chair: Their approach on the world stage hasbeen to economically act right, but to talk left on theinternational stage in order to satisfy the nationalisticbase. Do you think that sort of approach willcontinue? Where do you think they will be 10 to 15years from now?Professor Hurrell: Brazil has been going through aperiod in which many things have been very positive.There has been a very benign external environment.Economically, there was the rise of China, lots ofcredit pouring out of the United States, and countriesthrough the early 2000s buying Brazilianmanufactured goods. Politically, Brazil could exploita world in which, looking around at, say, the WTO,many people thought, “We can’t really run this anymore. It’s just a rich man’s club. We need moreplayers coming in.” Brazil was able to play upon thatperceived need for more participation and legitimacy.It has been a benign environment for the region. TheUnited States has not really been engaged. There has


11 May 2011 Professor Andrew Hurrell and Dr Marieke Riethof

been a space. We could talk more about the backyardquestion, but over the recent period there has clearlybeen, if you like, room for Brazil. So we have beenthrough a period where many things have gone well.Economically, the great political success of the Lulayears, to which I think your question directly alludes,was being able to combine macro-economicorthodoxy—in a sense, a continuation of many of thethemes of liberalisation—with, first, socialprogrammes to broaden the political base, and then,more recently, a re-engagement with aspects of a morestatist, nationalist economic policy. It is that blendwhich has, externally, enabled Brazil to talk to Davosand the World Economic Forum, but also to the WorldSocial Forum in Porto Alegre. Those two sides havegone together. One of the things we need to thinkabout, going forward, is whether many aspects of thatbenign environment, and that great success incombining different aspects domestically, is going tomeet greater challenges.Dr Riethof: To elaborate on the point you mentionedabout the role of the US in the region and what itmeans for Brazilian foreign policy, I would stress thatBrazil likes to conduct autonomous foreign policy asmuch as possible. It likes independence, or notnecessarily being dominated by the US. That is adriving force in the regional context andinternationally. But that does not necessarily meanthat there are not positive relations between the USand Brazil, which we can discuss further.I also want to stress that there is not necessarily acontradiction between Brazil’s state-led developmentpolicies, its progressive social policies and its positionon the international stage. There is a combinationbetween promoting free trade and the marketeconomy, and promoting the other policies.

Q97 Chair: Do you think we need to adapt ourapproach 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 wethink we are, and there are numerous “we’s” involvedin that. In the 1990s it seemed very clear: there was acoherent, developed, successful West led by theUnited States. Many of the prescriptions, political andeconomic, seemed very clear. So it was a matter ofbringing emerging powers from countries like Brazilon board, socialising them and integrating them. Whatwe have to get used to is a changing world in a moredramatic way, because the notion that the West has theanswers, that its institutions work, which was alreadyeroding, has come under much more sustainedchallenge through the financial crisis and a wholeseries of other factors.I think the big change is getting used to a world inwhich these are new partners. They are there roundthe table. It is not clear that anybody has a capacityto dictate who is at the table, or what the conditionsare. That is one of the messages of the G20. So thereis a very different kind of relationship—who sets theagenda? We see that in terms of debates about theagenda and about responsibility—who is being aresponsible great power? With the United States thereis the idea of being responsible stakeholders, growing

out of relations with China. I was in New York all lastyear and heard lots of language accusing Brazil, suchas, “Brazil is an adolescent, it hasn’t really learned togrow up, it’s got power but it doesn’t know how touse it.”Of course, the response on the Brazilian side is, “Well,but what is responsibility? Climate change—you’restill the great irresponsible.” So there is this debate,and it’s getting used to navigating in that world, ratherthan in a world in which there is a potentially simpleprocess of entry, that I think is the biggest challenge.

Q98 Sir Menzies Campbell: To some extent youhave anticipated and answered my question. Statusequals influence, but this carries with it responsibility.Do you detect any political change within Brazilwhich understands that? Has the change in thepresidency had any impact upon that idea? I know thatthere will be some specific questions aboutinternational institutions and the Security Council.Without delving into too much detail at the moment,do you detect any understanding that if you play amore important part in international institutions, youare expected not just to use your influence but todemonstrate your responsibility?Dr Riethof: First, on the possibility of change inBrazil with the new presidency, I would say that thereis a lot of continuity between President Lula andPresident Dilma Rousseff, so there is continuity in theforeign affairs team. There is also continuity ofpriorities, in developing the global role of Brazilthrough multilateral institutions and also throughBrazil’s economic and unitarian role in the world, andcontinuing to develop and strengthen relations withneighbouring countries. There are a few smalldifferences. First, President Dilma Rousseff seemsless likely to take very controversial stances ininternational politics than President Lula. She alsoseems to emphasise human rights a lot more. That isfrom 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 policyand real policy. In her case, there is a personalmotivation to support human rights.Professor Hurrell: That is right. In a number of areasone can see an active realisation about ongoingengagement, particularly when the thing you areengaging with is changing. I think climate change isa very good example. Through the nine months beforeand up to Copenhagen we saw a lot of movementinside Brazil as well as in terms of positions outside.Human rights is another very interesting one. Therewas a tendency to play what one might call hardballwith human rights through some of the Lula years—ajustifiable critique: “You’re selective”, “You’remessing around with the human rights regime”,“We’re rising”, and those sorts of ideas, and thenclearly a pull-back, whether it was instrumental ormore than just, that, “Yes, there are certain principles,we are a democracy, we want to be a liberal countryand we recognise that these are important norms.”

Q100 Rory Stewart: We can see a curious picture ofBrazilian action in foreign affairs. There sometimes



may be inaction in relation to countries such asPakistan and Afghanistan, sometimes unhelpfulpolitical action in relation to Cuba or Venezuela andsometimes eccentric action in relation to Iran, but isthere any coherent, original philosophy behind that?Is there a Brazilian narrative that they are presenting?Is there an intellectual or cultural energy saying, “Thisis Brazil’s vision of the world order”?Professor Hurrell: I’m a little bit of a sceptic aboutgiving too much attention to any country’s grandstrategies, but it is possible to identify a set ofunderstandings about the world. For many of thoseassociated with Brazilian foreign policy, the reasonwhy they are confident that they have some of thesethings right is that they have been more right thanwrong about how power is defusing and about therole of emerging countries and the need to reorientatethemselves to that. They see themselves as being rightin terms of the centrality of what we used to callnorth-south relations. There is a south-south policy,which obviously has self-interested, instrumentalgoals, but also has a set of normative moral claims.After all, President Lula has pressed arguments abouthunger, money, transfer taxes and raising resources,so there is a clear narrative there, which is aboutinterests and values.Even in some of the, what you term, “controversial”policies—the idea that Brazil, and we may talk moreabout the region, has a role in helping to manage andmitigate some of the more obvious deep-rootedregional problems that everyone recognises and someof the problems that others, particularly the US,recognise, say in relation to Cuba and Venezuela—itspolicy is clearly seen as part of a narrative about whatBrazil can do. That is not about the great, grandprovisions of some new global order, but importantprovisions of active diplomacy and responsibility inits region. There is a narrative, but how much onecan fit everything into a single grand strategy for anycountry is a slightly open question.

Q101 Mr Roy: We know that Brazil has signedtreaties and that the Brazilian constitution states thatnuclear activity is for peaceful means only. What areyour thoughts in relation to whether Brazil will wantto have or have a nuclear weapon? I would also likeyour thoughts on Brazil’s role in relation to non-proliferation and its role in that debate.Professor Hurrell: Again, it is an area of change. Justto be very quick, Brazil’s interest in nuclear policygoes right back to the ’50s. This was a phase that ledthrough to 1975 and the West German-Brazilagreement, which was the largest transfer of nucleartechnology ever to a developing country. That did notwork out hugely well, both scientifically andtechnologically and in incurring bad relations with theUS. From the late ’70s to the late ’80s there was theso-called “parallel nuclear programme” developingindigenous enrichment technology.The following decade was one in which Brazil wasvery much in favour of joining international regimes.That is the decade of the process that led to Brazil’sadhesion to the non-proliferation treaty in 1998—thecoming onboard. There is a change—a discernablechange—in tone, in the sense that by the time we get

to maybe 2004 or so, there is a return to a view thatthe control of our own indigenous nuclear technology,and particularly the enrichment technology that Brazilhad developed and wants to develop on an industrialscale for exclusively peaceful purposes, is animportant part of our national project. I think that thatis very clear. The dominant, overwhelming theme ofgovernment policy has been not only that it is forthose purposes, but that Brazil clearly upholdsexternal safeguards in what it does. There are issueswith centrifuges in energy plants, and there areongoing issues with Brazil’s reluctance to agree to theAdditional Protocol, or anything like it. Yes, therehave been statements by people in Brazil—sometimesofficial, sometimes semi-official—stating that Brazilshouldn’t have signed the NPT4 and that it shouldmaintain a control of nuclear technology such that, inthe future, it would give rise to different sorts ofoptions. That language has grown up, but it is verymuch outside of official policy.For me, characterising what we have seen in thenuclear area, there is very much a re-emergencewithin the so-called “nuclear renaissance”, which maybe ending now with Japan, of the idea of “ourtechnology, our development for our economicpurposes, industrial purposes, commercial purposesand energy purposes”. That is the thrust of whereBrazil has been going.

Q102 Mr Roy: So the bottom line is no nuclearweapons?Professor Hurrell: It has always been very hard toimagine what would be the real driver. There is a greatdebate about what drives states to acquire nuclearweapons. In the 1970s there was a latent nuclearrivalry with Argentina, not at the weaponisation level,but at the level of development. One of the greatachievements of regional security in Latin Americawas the rapprochement and the stabilising of thatrelationship, which is still a stable securityrelationship.So what do we have? We have a potential that thatrelationship might unravel. Some of the Brazilianlanguage is making Argentina think a little morecautiously about the future, but there is still nothingthat really represents a threat of unravelling. We havestatus drivers, and surely the focus on technology suchas nuclear-propelled submarines has both a defencerationale and a status rationale.More broadly, Brazil wants to be a player in areformed nuclear order. But it is very difficult to seewhat might be the direct pressures,5 which one cansee in other parts of the world, that could come backto push Brazil in that direction.

Q103 Mike Gapes: May I take you a step further onthat? Would you say that what has been characterisedby some people as a cosying up between Lula andAhmadinejad was a personal initiative of Lula’s? Ordoes it reflect the deep-seated view that countries havea 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 theworld.



and, even if they are signatories to the non-proliferation treaty, they shouldn’t be treated unjustly?The arguments I have had with Iranians about notsigning additional protocols are, “It is an intrusion,and we are not developing nuclear weapons,” and soon. 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, inhowever many years, we will know more about theindividual motivations. Interestingly, of course, Lula’spolicy generated this enormous debate andcontroversy inside Brazil about whether it was a goodthing or a bad thing—relations with Washington,human rights, and all of that.There was, above and beyond the specifics of Lula, asense of a nuclear regime that, for many people, hadbeen used selectively to reflect particular countries’interests, but there is a right of indigenous enrichmentand of legal indigenous technology. Those are quitebroadly shared views of “the nuclear order”. There isa view in Brazil, including within parts of the military,that Brazil had been a good player in the 1990s. Itsigned the NPT.What happens? Look at India. India is a player thatplays hardball with the nuclear order and getsrewarded. So you have that view, which, again, is notthe official government view. Those ideas are thereand will stay there, over and above the debates aboutwhether the engagement with Lula was a good or badthing for Brazil and for the world—normatively orwhatever it might be.

Q104 Mike Gapes: Can I switch the focus? You haveboth referred to the fact that Brazil sees itself as agrowing important player in the world. At themoment, it is a non-permanent member of the SecurityCouncil. As such, it did not vote the same way as theother non-permanent member, South Africa, on UNResolution 1973 with regard to Libya, but inabstaining it voted the same way as India. Where inthis spectrum does Brazil stand? Is it emotionally andintellectually with the traditionalist, non-interventionist view on foreign policy, or did it justfeel that it could not support intervention at this stage?Dr Riethof: It is more of an expression of Brazil’straditional rejection of intervention along the lines thatwere proposed in the resolution. Brazil does supporthumanitarian missions in other fields, so I don’t thinkit’s necessarily a case of Brazil seeing it as its futurerole to support these kind of interventions. Brazil isprobably likely to be more in the non-interventionistcamp, in that sense.

Q105 Mike Gapes: Does it see this as being animpediment to its taking on a leading role globally inglobal security, or does it think that it still wants to bea permanent member of the Security Council and sochange the way that the world is shaped?Dr Riethof: Brazil sees its role as more in mediationin international conflicts than in intervention, althoughwhether that is always realistic is a different question.Going back to the Brazil-Iran situation, that was anattempt by Brazil to prove that it was capable ofmediating and negotiating a major international

conflict, where it would not be necessary for theSecurity Council to impose sanctions.

Q106 Mike Gapes: What about the aspiration to bea permanent member of the Security Council? Is thatwidely supported in the country? Do people recognisethat it brings great obligations as well as status?Would Brazilian society generally, and the Brazilianpolity, be prepared to accept the responsibilities thatcome with being a permanent member?Dr Riethof: Support for a major Brazilian roledomestically is very considerable, so the internationalreputation of Brazil and foreign policy is a majordomestic policy issue in presidential campaigns. Ofcourse, as you say, that kind of role in the SecurityCouncil would require investment and potentially alsoparticipation in sanctions. If we look at the regionalcontext, Brazil is involved in conflict mediationthrough the regional structure of the Union of SouthAmerican Nations, but I am not entirely sure whetherthat translates into a recognition of the responsibilitiesin the Security Council.Professor Hurrell: The aspiration is a very, very long-standing one. There were debates over Brazil leavingthe League of Nations in 1926 and debates in the1940s when Brazil was on Roosevelt’s possible activelist as a permanent member. How much of a directpriority it is for Brazil has gone up and down, and ithas come back clearly in recent years as a very majorpriority. Obviously, as you say, Brazil is towards thesovereignty end of the spectrum, although there hasbeen quite a lot of movement towards ideas not ofnon-intervention but of non-indifference about whathappens,6 so there has been movement there. Thereis a big debate, though, about what the responsibilityof a permanent member actually involves. It clearlyinvolves activities in peace and security, which is partand parcel of how Brazil has seen its major role inHaiti.Does it always necessarily involve enforcement? Yes,perhaps, but there is another argument that says thatthe role of a broader membership could well be inproviding other assets of this mediation kind and otherimportant assets in terms of representation. So I thinkthe Brazilian view would be to press a broader debateabout what “the responsibilities” of permanentmembership are, but—you are right to suggest—witha creeping recognition that there are points where, ifyou like, the rubber hits the road and hard decisionshave to be taken.Is there broad support? Yes, there is much moreinterest in foreign policy domestically. There is muchmore support for an active foreign policy. There ismuch more domestic contestation about things likeBrazil’s Iranian policy. Would that translate into ahigh-risk foreign policy in terms of activeinterventionist policies? I think we have still got quitea long way to go there.

Q107 Mike Gapes: What attitude should the UKhave to Brazil’s aspiration to be a permanent memberof the Security Council? The British Governmentsupport Brazil’s bid, along with several others, butthat is always in the context of a complete reform of6 Note by witness: (inside other countries).



the Security Council, which is not going to happen.Do you think that we should just be saying, “PutBrazil on now, along with India and a few others”?Or should we wait for a complete reshaping of theSecurity Council?Dr Riethof: Given that reform of the Security Councilis a longer-term prospect, maybe. I would say that anactive role could be to recognise Brazil’s variousforeign policy roles and various formats and regionsand to use that also to support a Brazilian role at aglobal level, even if that does not immediatelytranslate into a permanent seat at the Security Council.As you probably know, US support for Brazil as apermanent member has not been expressed openly,and China is apparently also not necessarilysupporting a Brazilian bid, so some support may beuseful for a Brazilian campaign in that direction.

Q108 Mr Watts: Can I just push you on MikeGapes’ earlier point? Would Brazil rule outintervention, or would it accept intervention as part ofpermanent membership? If, in theory, it would notwant to endorse any sort of intervention under anycircumstances, does it see itself as a moderating forceto add something different than exists at the presenttime? What is the motivation for them?Professor Hurrell: One needs to unpack a little bitthe idea of intervention, because, as I said and as youhave heard, certainly within the region, the movementtowards a notion of non-indifference and the idea thatproblems and issues often very, very deeply embeddedin other societies require an international response, inwhich Brazil has been willing to be active—whetherthat is crises in Bolivia or problematic relationsbetween Colombia and Venezuela—is quite asignificant movement. It is different from forciblecoercive intervention, but it is still quite an importantmovement in terms of understanding where thecountry has come from and where it might go.Even in the Libya case, not just in relation to Brazilbut more generally, there were differences between thetwo resolutions. The first resolution actually bringsemerging powers along, mentioning theResponsibility to Protect and mentioning the ICC,7

which, for a country like India, is a big thing tohappen. It is different and distinct from the secondresolution, which was seen to be far too open-endedin terms of the scope it might give to intervention.Seen in that way, it is not a black and white story inwhich Brazil and other emerging countries are lockedinto this absolutist non-intervention position. Therehas been movement. The question is about the termsof that movement and the terms of intervention. Thatbrings us back to the other question, “If you were amore permanent member and achieved your goal,would that be sufficient to shift your policy furtherand more dramatically still?” I would be quite hesitantin suggesting that there is anything like an automaticrelationship between those two things.

Q109 Sir Menzies Campbell: One of the forms ofpermanent membership that is on the table ispermanent membership without a veto. Would Brazilregard that as being second-rate? When you answer7 International Chamber of Commerce.

that, perhaps you could refer back to your analysis ofthe kind of foreign policy that Brazil might beexpected to follow. It seems to me that you couldfollow that non-interventionist policy—let me call itthat for shorthand reasons—perfectly well without aveto. But how would Brazil regard that kind ofdivision of responsibility within the Security Councilfor permanent members?Dr Riethof: I have to say that I am not entirely surewhat Brazil’s view is on that issue.Professor Hurrell: You would have to inquire moredirectly of those who are following the specifics ofthe negotiations. I guess that it would depend on whatthe overall package of a reform looked like. Forexample, if it was a large reform with a large council,would there still be a hierarchy from which Brazilwould feel excluded? It is quite difficult to answer thespecific non-veto question without knowing what thepackage would be, which that non-veto questionwould be a part of.

Q110 Sir Menzies Campbell: Perhaps that’ssomething that should be explored on theCommittee’s visit.May I ask you a few questions about the BRICcountries? First of all, it is not a formal grouping.Nevertheless, do you think that that informal groupinghas any influence upon Brazilian foreign policy? DoesBrazil look round at the other BRIC countries and tryto be equivalent to them in its approach?Professor Hurrell: I am not sure about looking roundat them. In a sense, the BRICs grouping was inventedout of the whole notion of emerging markets, byGoldman Sachs and so on. There are any number ofpeople who will tell you why the BRICs make nosense as a grouping. For example, what is Russiadoing in there, as it is a declining power? And soon. There are all the differences and contradictionsbetween the foreign policies and world views of thesecountries. All of those things are true and yet theextraordinary thing about BRICs is that it has acquireda kind of diplomatic reality. There are BRICs summitsand I understand, as an academic outsider, that in anumber of other groupings, such as the G20, theBRICs framework for co-ordinating and discussingpolicy seems to have taken on a certain kind of reality.So my view is that, yes, all of the obvious problemsare there and BRICs are not going to be the definitivealliance that will change and structure the world, butwe are not really in the business of very clearalliances. We are in a much more fluid and flexiblesituation 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 quitea lot of life left in it yet, particularly since we arein the process of beginning to rethink some of theinstitutional structures of global governance. Mybottom line is that, despite everything, there is slightlymore there with BRICs than one might have expected.

Q111 Sir Menzies Campbell: Would Brazil thinkthat it enjoyed considerable influence within thatgrouping?Professor Hurrell: If you look at all the indices, manyarticles in the Financial Times and elsewhere were



asking, “what is Brazil doing there”? It really shouldnot be there, it is in such a different rank in terms ofpower. We have China, and India, even, which are inmaterial power terms, many times more important.

Q112 Sir Menzies Campbell: All nuclear powers, inthe case of Russia, China and India. All possessingnuclear weapons.Professor Hurrell: Yes, exactly. So what is Brazildoing there? Well, we can have that debate and wemight argue that other kinds of power resources arevery important. Brazil has a number of assets that giveit an important place in terms of how we think aboutglobal governance—in the environment and so on—but from Brazil’s side, as we have already said, thedependence, the centrality of a kind of activist,multilateral, small-group diplomacy is very clear. Thisis the road that says: if you can’t build it on the backof your own national power, you have to build it onthe back of what one former Brazilian diplomat called“diplomatic GNP” and the BRICs are clearly part ofwhat you might call diplomatic GNP.

Q113 Sir Menzies Campbell: That is the basis foryour illustration of their role at the G20?Professor Hurrell: Yes.

Q114 Mr Roy: Taking you on to the issue of aid toAfrica, should the United Kingdom Government beconcerned about the level of aid that Brazil now putsinto Africa and its growing stature there?Dr Riethof: Aid from Brazil to Africa is growing fast,but still, on a global level, overall Braziliangovernment expenditure is a relatively minor amountof money. However, there is very clearly growing aidand also growing investment in trade with Africa. ForBrazil, this is partly to promote its economic interestsin the region, so Brazil is a major exporter ofmanufactured goods to Africa and Africa exportscommodities and natural resources to Brazil. TheAfrican relationship that developed under PresidentLula 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 andfor Brazilian permanent membership of the SecurityCouncil. Whether this is something to be concernedabout is a question of scale, because the Brazilianeffort there, as well as being small, focuses on aid,and very much on social programmes and agriculturaldevelopment. It also focuses on the Portuguese-speaking countries, the traditional partners of Brazilin West Africa. I would say that it is relatively minor,but a major part of Brazilian foreign policy indeveloping its international, global role.

Q115 Mr Roy: But is it a way of buying support andinfluence? Also, based on that, is there a danger overits relationship with China, which seems to be doinga very similar type of exercise in that area of theworld? Is there a danger that those relationships couldbe affected?Professor Hurrell: I don’t see that. It seems to me avery different kind of case from the concerns thatemerge over China, in terms of strategic competition

or undermining notions of what aid is about. I havenot followed and participated at all in the official sideof UK-Brazilian relations, but it has always seemed tome that the relationship over policies towards Africais actually—I was going to say easy, but that is notquite the right word—a good and productive one,because the policies of the two countries run in broadparallel. Yes, Brazil has a particular focus on thenature of its social programmes. It makes claims aboutits own experience, and there are different places interms of Portuguese Africa, but in broad terms itseems to me that when people are putting togetheragendas for UK-Brazil, action and aid in Africa is anarea where there are clearly many things that could bedone together on the ground, and perhaps also inthinking about what the aid regime more generallywill look like in years to come. I see it as verydifferent in character from somewhere like China, butperhaps I have missed something.Dr Riethof: It may be a small point, but it seems fromthe evidence that Brazilian aid to Africa tends to bemuch less controversial than Chinese investment andaid in Africa.

Q116 Andrew Rosindell: In terms of relationsbetween Britain and Brazil, and in terms of Brazilianrelations with its near neighbours, we have the issueof the Falkland Islands. What is the likelihood ofBrazil helping to heal the rift between Argentina andBritain, and perhaps acting as a mediator? Is there apossibility of that?Secondly, if that is not a possibility, are we readingthe signs correctly that perhaps the hostility towardsBritain from Brazil is growing? We have seen one ortwo recent events that have indicated that. Is there achance that Brazil will help, or continue to supportArgentina’s claims?Dr Riethof: To start with the second question, I thinkwe need to see the Brazilian action in January in aregional context. It was agreed in November 2010 at aUnion of South American Nations summit that certainactions would be taken regionally, and that has beenpromoted by Argentina for the last few years in aregional context. That also fits with Brazil’s agenda ofstressing national sovereignty and national self-determination. But I don’t necessarily think Brazil isactually moving towards stronger support forArgentina’s claim over the Falkland Islands. WhetherBrazil will play a mediating role in the Falklands isan interesting question to explore. Of course, Brazilhas economic interests in the region, and it haseconomic interests in Argentina, so that might be away to mediate.

Q117 Andrew Rosindell: Do you feel that Brazil’sposition is purely because it is part of that region ofthe world, and it feels that it had better stick with itsneighbours and back up Argentina, or does itgenuinely support Argentina’s claim over theFalklands?Dr Riethof: I hesitate to say whether it does or doesn’tsupport Argentina’s claim, but I think the incident inJanuary needs to be seen in the context of theBrazilian President visiting Argentina for trade



relations, so there is also an element of politicalcontext that needs to be considered.Professor Hurrell: I would underscore the regionalpicture, and how it has changed. We mentioned a littlewhile ago the background of Argentina-Brazilianrivalry. Relations were bad in the 1970s. They beganto improve in the late ’70s, and improved substantiallybetween Brazil and Argentina through the 1980s.When we look at a map, we think that Brazil is andalways has been part of Latin America, buthistorically that is not really accurate. Brazil has seenitself as different and distinctive from the rest of LatinAmerica. The first visit by a Brazilian President toColombia was not until 1981. Brazil has been veryseparate, so the move to the region, and theimportance of the region in Brazilian foreign policy,is something we can trace. It has become a centralpart of Brazilian foreign policy, so not doing anythingthat would be dramatically out of step with the region,or that would interfere with its regional policy, seemsto be something on which one can bank quite heavilyas a major factor that influences what Brazil does anddoesn’t do in relation to the Falklands/Malvinas.

Q118 Chair: To go back to the USA, what is Brazil’srelationship like with the States and do you think wewill ever be in a position where we in the UK have tochoose between Brazil and the USA?Professor Hurrell: I doubt it.Chair: Good.Professor Hurrell: Many people look at the broadhistory and think of the United States as being soobviously the completely dominant country over itsbackyard, and that everything that any country inSouth America does is exclusively and heavilyfocused on the United States. What is interestingabout Brazil and the United States is that as we moveinto the post Second World War period, the periods ofvery 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 thatthat has not actually changed. As the United Stateshas become very preoccupied, post 9/11, with otherparts of the world, relations, say between the LulaGovernment and the Bush Administration, werecordial, but there was not a lot of substance.There are clear signs from the Brazilian governmentthat 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 withstrategic, emerging partners, of a new focus on Brazil.Yet what is quite striking is the difficulty of givingmuch meat and substance to that agenda. It is a crudecomparison, but if you compare the nature of, say, theUS-Indian relationship, there is nothing comparableand nor is there likely to be. Of course the UnitedStates is a major player for Brazil, but Brazil, as thediscourse and the rhetoric has it, sees itself as a globalplayer and only sees the United States as one part inthe bigger range of its relationships. On that basis, it ishard to imagine a situation where that kind of questionwould emerge.Dr Riethof: Although there have been quite a fewdisputes and disagreements over the last few yearsbetween Brazil and the US in political fields and alsoin the economic area, relations are generally co-operative and they should be seen within the generalforeign policy objectives of Brazil, including theBrazilian aim to keep support among the greatpowers—the members of the Security Council—forits bid for a permanent seat. It is quite a complexrelationship; it is not a formal alliance, and I thinkthere will always be certain areas of disagreement.One of the more prominent ones is the area of traderelations.

Q119 Chair: We have completed our questions. Havewe asked you all the right questions? Is there anypoint you would like to summarise or are we there?Professor Hurrell: We have covered the UN and wehave talked about nuclear. I would always includeclimate change and the environment as well becauseif we are thinking about why Brazil matters—Chair: We covered that with other witnesses.Professor Hurrell: I am sure you have, but on theglobal issue side that is really important. Obviously, Ipresume you are pursuing the domestic side of thequestion of sustainability, or at least the challenges,on the domestic side, as discussed in the earliersession this afternoon. This is a necessary counterpartto Brazil being able to do the sort of things we havebeen talking about on the international side.Chair: Thank you both very much indeed. It is reallyappreciated. We are going off there in three or fourweeks’ time and it is very helpful to have this sort ofbriefing before we go.


Wednesday 8 June 2011

Members present:


Mr Bob AinsworthMr John BaronSir Menzies CampbellMike Gapes

________________


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 tothis hearing of the Foreign Affairs Committee. It’s ourthird and final session for our report on UK-Brazilrelations. Our witness is the Minister of State, JeremyBrowne, who is responsible for this area. He isaccompanied by Angus Lapsley, Director for theAmericas at the FCO, and Vivien Life, ActingDirector of the Prosperity Directorate. I welcome youall. I am sorry that you got caught in the rain on theway here. Minister, you are now homing in on theForeign 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 yourcolleagues. I welcome you again. It is only three orfour weeks since you were last here, when you weretalking about the human rights report. The ForeignSecretary told us that he thought that by 2015 thebilateral relationship between the UK and Brazilwould be visibly strengthened. What progress hasbeen made on that over the last year, and how do yousee it going over the next few years up to 2015?Mr Browne: First, Chairman, thank you for givingme an opportunity to discuss this issue. That questionencapsulates probably the whole hour and a half thatwe will have together, so I will try to give areasonably succinct answer and then look to expandon it in answer to subsequent questions. Let me startwith a quick scene-setter. If you ranked the continentsof the world in a hierarchy based on the amount ofattention afforded to them by Britain—I don’t justmean the British Government; I mean media,Parliament, dare I say it, continents that British peoplehave travelled to etc.—Latin America would bebottom of the league table. That continent has sufferedfrom benign neglect, and I am not making aparticularly party political point. It is noticeable, ifone attends Foreign Office questions in the House ofCommons, how few questions cover subjects to dowith Latin America, so it is a wider point. We arekeen to address that. That doesn’t mean that I thinkthat Latin America will suddenly be catapulted to thetop of the league table, but I do think we have somecatching up to do.Brazil is the market leader. Its GDP is more than halfthe total GDP of South America—not Latin America,because Mexico is in second place. We have all kindsof shared interests. Somebody put it to me that if wewere seeking to invent a world superpower that was

Andrew RosindellSir John StanleyRory StewartMr Dave Watts

new on the stage, we might well look to inventsomething pretty similar to Brazil, by which I meanour interests are not just economic but cultural, valuesbased, educational and policy based. We have a lot ofshared interests and we wish to increase ourengagement across the board, whether that is byhaving a greater number of people working in Brazil,as we will do, by having more visits from high-levelpoliticians—for example, the Deputy Prime Ministeris visiting Brazil the week after next—or throughHouse of Commons engagement. I’m delighted thatyou are part of this process yourselves. It may alsobe done through sporting links. I hope to have moreBrazilians studying at British universities—and so onand so forth. I think that by 2015 we will see moresigns that Britain is more engaged with Brazil andother countries in Latin America as well.

Q122 Chair: How will you measure performance?Mr Browne: Some areas lend themselves tomeasurement more easily than others. There is atarget, which you will be aware of, seeking to increasethe value of British exports to Brazil from £2 billionannually to £4 billion annually. Of course, that is notsolely the gift of the British Government; it relies onBritish businesses producing goods and services thatBrazilians wish to buy. But it is a reasonable target,and that is why our UKTI and Foreign Office teamsare geared up to try to achieve those targets. Youcould measure it, I suppose, in terms of numericalassessments such as the number of Brazilians studyingat British universities, but in other areas, it may beharder to measure so definitively as that. It may justbe a wider sense that Britain has not neglected therelationship.When I was in Brazil about three weeks ago, it wasquite striking that the general view of Brazilianopinion formers—admittedly, the type of people Iwould be likely to meet—was that they were welldisposed towards Britain. They probably look moretowards Europe than towards other countries in SouthAmerica for inspiration, whether on politics, cultureor anything else. We do not, however, have aprivileged place. Bluntly put, in many regards we arebehind the Germans, the Italians, and even smallerEuropean countries like the Netherlands, in aspects ofour relationship with Brazil. Brazil is well disposedtowards us, but it does not give us automatic bonuspoints that are not earned in terms of our relationship


8 June 2011 Mr Jeremy Browne MP, Angus Lapsley and Vivien Life

with it. We have a good opportunity, but it is up to usto take it.Chair: No free lunches.Mr Browne: Well, you may discover otherwise, but Iunderstand your point.

Q123 Chair: The National Security Council hasproduced a strategy paper on Brazil, but it has notbeen made public. Is it possible to share with us thethrust of the paper? Will a version of it be madeavailable to us, albeit on a confidential basis?Mr Browne: I am not aware of the basis on whichthose papers are produced and distributed; that is not adecision that I make. There may be some informationcontained within the paper that is of a sensitive nature,but most of the areas that were considered were notsecurity based but about economic prosperity, trade,environmental engagement, educational links and soon. I wouldn’t have thought that it would be necessaryto withhold most of that material, but I am notresponsible for the Secretariat of the NationalSecurity Council.

Q124 Chair: Will you be able to look at whether ornot we could be briefed on its content?Mr Browne: It may be that Angus, who leads on theAmericas for us in the Foreign Office, will wish toanswer that. To spare you leafing through it all, thebest solution might be if you have a meeting directlywith him and discuss some of these issues in greaterdetail.Angus Lapsley: I am certainly open to that, but theremay be a short cut which might help you. The networkin Brazil, like all Foreign Office diplomatic networks,has what is called a country business plan, which isvery closely based on the strategy adopted by theNSC. If that is not on the embassy website, it will beshortly and we can certainly share a copy of that withyou. It basically sets out what we in London areasking the network in Brazil to deliver. It is very muchbased 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 developinga strategic relationship with Brazil. What does thatmean that is any different from the kind ofrelationship we might have with India, South Africa orany other big regional power? What is the differencebetween saying, “This is a regional power; it mattersand Britain has a relationship with it,” and saying thatwe want a strategic relationship?Mr Browne: That is a good question. You would behard pressed to find a Foreign Office Minister whosays that they do not want to have a good relationshipwith countries such as India and South Africa. I tendto find, given the nature of a lot of papers that areproduced in the Foreign Office, that we seek to havea good relationship with pretty much everybody. Whatwould make Brazil different, however, is that there isa high degree of compatibility between our politicalapproach and that of the Brazilians.For example, I was not there myself but I was told bythe Secretary of State for Energy and Climate Change

that in Cancun he worked in greater harmony andharness with his Brazilian opposite number than withany other climate change or environment Ministerpresent at the talks. I was in Brazil and had a meetingwith Ministers and parliamentarians—many of whomyou may well meet yourself in Brasília—to talk abouthuman rights issues. It is quite striking that althougha bit of progress needs to be made in Brazil in areassuch as prison conditions or domestic violence, forexample, Brazil is quite a good voice internationallyin terms of our values. Rather than having the familiarcast list of European countries and North Americansmaking those points, there is the opportunity for a newvoice to make points that we would support.In commercial and business terms, Brazil is theseventh largest economy in the world, and it willshortly be the fifth largest—that depends slightly onhow you measure such things, but it will overtake usand the French reasonably soon. Brazil is still only the83rd largest in GDP per capita, before people get toocarried away with the quality of living of the averageBrazilian, but in economic terms—in terms of itsdollars GDP per capita, which I think is $8,000 or$9,000—Brazil is getting into territory where what theBritish economy offers, in terms of services or hi-techmanufacturing, is very compatible with the next phaseof Brazilian economic development. So, in political,values and economic terms, there is a greater marriagebetween what we offer and what the Braziliansrequire—therefore, to the mutual benefit of both ofus—than may be the case with some other countries.

Q126 Rory Stewart: In terms of getting, bluntly, intoa position where we could reasonably compete withFrance or Germany in Brazil, are you sure that wehave the right kind of embassy and the rightapproach? We have two extensive speakers ofPortuguese in the embassy, and perhaps four or fiveoperational speakers among the UK-based staff. Wedo the Queen’s birthday party at lunch time, and infootball strips last year. We are not really penetratingthe Brazilian elite in the way that the French orGerman embassies have over the last 20 or 30 years,partly because we have tended to focus on climatechange. Are you proposing to do anything that wouldallow you to develop the political context for theBrazilian elite, where our European competitors arewell ahead of us and have been consistently?Mr Browne: You are right to make the observationsabout 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 theroom, how many Brazilians have German, Italian, or,to a degree, French ancestry, and therefore perhapshave a disposition towards having connections withand doing business with those countries in Europe. Ihave no personal objection to us making a virtue ofour shared interest in football, but I take yourunderlying point, which is that the Brazilian politicalestablishment, civil service, and diplomatic service arehigh calibre, impressive operators, and we need toensure that we engage effectively at a level that islikely to maximise our influence.



Perhaps a wider point that you are touching on is whatvalue the Foreign Office puts on what we now calldiplomatic excellence, by which we mean deepunderstanding of a country’s culture, history, politicalsystem, architecture and language, compared withhaving a campaign-mode diplomacy, if you like. It istrue to say that this Government has shifted theemphasis away from what I described as campaign-mode diplomacy—important though some campaignsare—towards trying to make sure that we get the corebasics right, in terms of our diplomatic offering. Thatcompletely applies in countries around the worldwhere the pace of change is fastest. I would like usto have more people in the Foreign Office learningMandarin, or having a really sophisticatedunderstanding of the politics of all the different partsof India. It is not just a Brazil issue. What does theForeign Office exist to do? It is to have a moresophisticated and deeper understanding of all thedifferent countries in the world than would otherwiseexist if the Foreign Office were not there.I am entirely sympathetic to your question. I hope thatwe are going in that direction. I would notunderestimate the calibre of the people that we havethere—we have many good people—but I would beinterested to hear what the Committee thinks aboutways that we can make further improvements in theyears ahead.

Q127 Rory Stewart: Is there any opportunity tobuild up a more developed cadre of specialists, whocould specialise in the Portuguese language, or inLatin America, and who could really organise theircareers around that kind of understanding and thoserelationships?Mr Browne: Let me comment briefly, then come toAngus or Vivien. There is a wider point, which is thatif you are an ambitious young person joining theForeign Office, how do you make it to the top, andwhat do you even regard as the top? Is your ambitionto become the Ambassador in Washington? Mostpeople would probably regard that as the most seniorjob, but it could be the United Nations or Paris—whatever it might be. I would be keen to see a greaternumber of people who could see their careeradvancing through greater knowledge of LatinAmerica.That reflects the wider observation that I made rightat the beginning, which was when I said that if yourank the continents of the world by how they areperceived in Britain, you would probably put LatinAmerica at the bottom. It would be odd if the ForeignOffice was completely removed from that, and it ispossibly the case that some people joining the ForeignOffice think that they will see more high-profile workin the Middle East or elsewhere in Europe, forexample, than they might see in Latin America. Sothere is an internal perception issue that we need toaddress within Government.What makes a difference of course—I will put thisin terms that may slightly flatter the Committee—arethings like the Foreign Affairs Committee going toLatin America or the Minister needing to be preparedfor a session in front of the Committee on a LatinAmerican country. All of that creates a sense of

interest and a sense of people being in a part of theDepartment where their skills are valued. As I haveonly been there for a year, however, I would defer tothose who have been there longer.Angus Lapsley: Six months longer than me. I havethree brief points. On languages, it may be a little bitbetter than you perhaps think. The distinction betweenoperational and extensive is often to do with whetheryou have come back home to do the exams or not. Inpractice, we would expect the people in Brasília andSão Paulo and elsewhere to be working at anextensive level, and I am pretty confident that ourfront-line staff are doing just that.Secondly, the job of Ambassador in Brazil is now oneof the top jobs in the Foreign Office. It is one of the10 or so SMS-3 or director-general levelambassadorships. It really is one of the most highlysought after jobs.Thirdly, you are right that a lot of our effort has beenon climate change. That is where a lot of the staffhave been, but we are broadening that out. I was notable to talk about this when I met the Committeeinformally, but the Foreign Secretary has now madehis announcements about network shift, and we arereinforcing our network in Brazil. We are doingtargeted reinforcements such as, for example, puttingsomebody into Rio to work specifically on sportsissues in the run up to the World Cup and theOlympics, where there are huge commercialopportunities. We are also putting extra people in todo basic political economy work, so that we reallyunderstand what is happening in Brazil and providepeople in our embassy that the whole of Whitehall canplug into and get really good high-quality advice onwhat is happening in the country. To that extent, Iagree with you, and we are moving in the direction ofa reinforced network in Brazil.

Q128 Sir Menzies Campbell: I am stimulated by thediscussion about strategic, and in a moment or two Iwant to ask some more questions about the global rolethat Brazil might play. But is not a strategicrelationship one where there is a sense of commonpurpose—not necessarily in every aspect of therelationship—which also implies a degree ofpartnership? If I am right about that, are you able toidentify areas in which you think—apart from theclimate area that you referred to—there is theopportunity for common purpose and partnership?Mr Browne: Yes. I take your point, which is that wewant to have a relationship where we feel that the twocountries represent something more than the sum oftheir parts and can speak together with an amplifiedvoice in international arenas. If you take the examplethat you may have in the back of your mind aboutBrazil abstaining on the vote on Libya in the UnitedNations, that would be an example of where we arenot, at this stage, able to reach that conclusion.Having said that, there are quite a lot of areas wherewe are fairly in sync. Many of our business andcommercial interests overlap. Our sporting andcultural interests overlap. We are deficient in terms ofour educational exchanges, but not because there is anantipathy towards educational exchanges. It has justsuffered to a degree from neglect and insufficient



attention. To put it in non-diplomatic terms, I havejust come back from China, which I also cover, andmy conversation about human rights in Brazil takes arather different form from my conversation abouthuman rights in China. There is a lot of synergy interms of political and values-based agendas, whichmeans that, by and large, we are in the same place asBrazil on more issues than we are not.

Q129 Sir Menzies Campbell: That leads logicallyon to the question of what role you would expectBrazil to play as it emerges, given that the analysistends to suggest that the more economically powerfula country becomes, the more politically ambitious itbecomes. We have China and India as very eloquentexamples of that. What role does Her Majesty’sGovernment expect Brazil to play?Mr Browne: Brazil itself aspires to play a global rolerather than a continental role. It sees itself increasinglyin those terms. The only observation I would makeabout all of the three countries that you havementioned is that Britain, France and the United Stateshave a lot of experience in playing global roles.

Q130 Sir Menzies Campbell: Some of themcolonial.Mr Browne: Drawing on all kinds of sources. Thepoint I am making is that that comes with a degree ofexpertise and self-confidence in institutions like theUnited Nations, which is not necessarily acquiredovernight. We welcome many of the countries havinga greater role. We support Brazilian and Indianpermanent membership of the UN Security Council,but that comes with obligations. It is not necessarilyas straightforward or as attractive as it may appear onfirst inspection. All those countries are feeling theirway into greater global roles. We are keen for them todo so. It is a gap that the UN Security Council doesnot have a permanent Latin American member. Itwould be strengthened by having permanentrepresentation from that part of the world, althoughthat would, of course, give the country that wasrepresenting that broader interest, in this case Brazil,a degree of obligation or responsibility that it had notpreviously exercised.

Q131 Sir Menzies Campbell: If we can deal withthe UN question. As you know, the debate aboutUnited Nations reform has taken place for a long time,usually focused entirely on membership of theSecurity Council, although there is a wider argumentabout reform generally, including elsewhere in theUnited Nations architecture. For example, one of theideas that has been floated is, “Yes, there can bepermanent membership for countries like Brazil andIndia, but there will be no extension of the veto.” Isthat an argument or discussion that you have had withthose interests in Brazil who are anxious to promotethe case for permanent membership?Mr Browne: The straight answer to your question isno, I have not discussed it in those terms. Britain hasa long-standing position, which has not been alteredby a new Government coming into office, to expandthe permanent membership to include Germany,Japan, India, Brazil and African representation.

Whether you could have a Security Council, with 10countries exercising a veto, which was still able tomake decisions on very much, is a moot point.One potential area for compromise would bepermanent membership without a veto. The Braziliansare appreciative of us supporting their position. Theonly sensitivity is that the Mexicans are lessenthusiastic about Brazilian permanent membershipthan the Brazilians are, as you might imagine. It is agood basis for us to argue the Brazilian case. Thedefault mechanism in all these institutions is to stickwith what you have got, unless there is a momentumto change. That is always difficult to effect and thereare interests that prevent that from happening. I havenot discussed it in those terms with them, but theBrazilians certainly aspire to exercise a bigger role onthe world stage, and we are instinctively sympatheticto that objective.

Q132 Sir Menzies Campbell: You mentioned thecorrelation between rights and responsibilities. Howbig a policy change do you think it was for Brazil tovote in favour of a Special Rapporteur on HumanRights for Iran?Mr Browne: I think it is a significant policy changeand it has been interpreted as such, because there isquite an abstentionist mindset in some aspects ofBrazilian foreign policy and, if I am being moregeneral, in some aspects of Latin American foreignpolicy as a whole, in so much as it can be seen as acollective body of thinking. I did not previously get asense that there was a desire to frustrate the ambitionsof countries such as Britain, but there may not havebeen a great enthusiasm for supporting thoseambitions, so that is quite a significant shift, becauseit suggests that the Brazilians are in a position that wewould like them to be in, and keen to take aresponsible leadership position on a country that is ina completely different part of the world from them. Inother words, they are thinking globally rather than ona regional basis. Given that we broadly share the sameoutlook as the Brazilians, we welcome their widerinterest.

Q133 Sir Menzies Campbell: But measuredagainst—as you said in your introduction—thedisappointment over their vote in relation to theresolution.Mr Browne: Yes, it was an interesting vote. The fiveabstainers were rather significant countries, but ofcourse in some cases the assessment was that anabstention was not a bad result, because the alternativewas a vote in the opposite direction from us. I wouldnot necessarily put Brazil in that category. I think thatBrazil is a country that we would think of asabstaining, but inclining towards the British side ofthe debate rather than the alternative side. But it isquite striking that, for example, the Colombians votedwith us on that decisive resolution and did so withgreat clarity and lack of fuss, if I can put it in thoseterms. They were very clear-minded about the waythey cast their vote, and that was not the case with theBrazilians, so different countries are in differentplaces.



The Brazilians are the largest country by some marginin every regard in Latin America, but they are notnecessarily the country that we would see as havingthe quickest or—how can I put it?—greatestcompatibility with us on all foreign policy issues inLatin America. But they are in a position with whichwe are comfortable, and with which they arecomfortable as well. We enjoy working with theBrazilians. We see it as a partnership that has strongpotential to develop further in a good direction.

Q134 Sir Menzies Campbell: They are putting a lotof resources into their foreign service. It has also beensuggested that, were they to become a global power,whatever that may mean, they would want to spendrather more money on defence. Do you attach anysignificance either to the first of these, or the second—the ambition?Mr Browne: Certainly to the former. The Braziliansare seeing themselves as having a greater global role,and one manifestation of that is Brazilian embassiesand consulates opening up in different parts of theworld, with very high calibre staff and larger numbersof staff. I strongly support the Government’s deficitreduction measures, but as a Foreign Office MinisterI am quite struck by how little we spend on globaldiplomacy.

Q135 Sir Menzies Campbell: You will find a readyear for that.Mr Browne: I think the French, who have almostexactly the same population and GDP as us, spenddouble what we spend. That is always seen as a cost-free decision by us, or at least some people may thinkit is cost-free. We have extremely able people and soit does not always show. But it is a more competitiveglobal environment. Countries such as Brazil, but alsoother major countries that have been mentionedalready—China being a perfect case in point—areseeking to paint on a broader canvas, and we needto be mindful of the potential consequences of that,although, in the case of Brazil, that may well meanthat we have a willing ally in more countries than wepreviously did, so it may be an entirely positivedevelopment.In terms of defence, Brazil has not previously beenregarded as particularly expansionist, and comparedwith other developing superpowers that is still thecase, but it may well see its role increasing in theyears ahead.

Q136 Sir Menzies Campbell: It might be a marketfor our redundant frigates.Angus Lapsley: Two points: there are some parts ofthe world in which the Brazilians have stepped uptheir diplomatic representation, in which theyrepresent a new partner for us, particularly in WestAfrica and the Caribbean. That is very helpful,because those are parts of the world in which we havelong wanted other people to get involved and it isuseful to have another interested partner. TheBrazilians are becoming an increasingly importantdevelopment player, because they are prepared to putmoney in.

There is a growing ambition on defence in Brazil.That is essentially focused on its own regionalsecurity and, in particular, its maritime security, whichoffers considerable potential for co-operation, with theRoyal Navy for example. It is also focused onpeacekeeping. Brazil already plays a significant rolein Haiti, where it leads the international peacekeepingoperation. We would like Brazil’s international role inpeacekeeping to continue growing and we are offeringco-operation and partnership to help with that.

Q137 Sir John Stanley: Minister, I have a couple ofquestions, both of which are on the international front,but are in two different areas. First, the internationalArms Trade Treaty is going to start and it reaches acritical negotiating phase next year. I have receivedadvice from officials in your Department that Brazilis adopting a less than positive attitude towards theArms Trade Treaty. In particular, it is seeking toremove or to exclude the all-important reportingobligations on countries that become signatories andratifiers of the treaty relating to the arms exportlicences that they approve, which is, of course,absolutely fundamental to the treaty. What steps arethe British Government taking to try to get Brazil toadopt a more positive and constructive attitudetowards the Arms Trade Treaty?Mr Browne: I am searching around because I do nothave an off-the-peg answer for you. Unless anyoneelse wishes to answer, I would say that perhaps thatanswers the question in its own way. I am not awareof a situation that is as concerning as the one youimply, Sir John. We have a co-operative relationshipwith Brazil and I do not know of anything to suggestthat it is seeking to be obstructionist in that way. AllI can do is undertake to find out whether there isfurther work to be done.

Q138 Sir John Stanley: You have seen the questionthat I have put, so perhaps you would like to followit up with a response in writing when you have hadtime to make some further inquiries.Mr Browne: Absolutely. I apologise, but perhaps thereason why I am not alert to those concerns is becauseI have not heard Brazil being raised in that context.Mostly, when Brazil is discussed in defence and armsexport terms it is seen—as Sir Ming has alluded to—as being a benign force and a potential market forsome of our sales, rather than as being on the otherend of the spectrum and frustrating our values. Weneed to check whether there is an area there that weshould be concerned about. I will certainly let youknow if that requires further work.1

Q139 Sir John Stanley: Thank you. My secondquestion relates to human rights. You referred to yourconversations on human rights in Brazil. The advice Ihave from the House of Commons Library is thatBrazil has neither signed nor ratified the amendmentto article 8 of the International Convention on theElimination of All Forms of Racial Discrimination;she has neither signed nor ratified the optionalprotocol to the International Covenant on Economic,Social and Cultural Rights; she has neither signed nor1 See Ev 67.



ratified amendments to articles 17(7) and 18(5) of theConvention against Torture and Other Cruel, Inhumanor Degrading Treatment or Punishment; and she hasnot signed or ratified the International Convention onthe Protection of the Rights of All Migrant Workersand Members of their Families. Minister, I would notexpect you to respond immediately to that, but couldI ask you to respond in writing about whether that isindeed the position of the Brazilian government, andif so, whether the British Government is seeking toamend 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 whenwe go overseas, so it would be very helpful if youcould fill in for us what you understand the Brazilianjustifications are for these non-signatories and non-ratifications, and whether the British Government istrying to change the Brazilian position.Mr Browne: May I thank you, Sir John, for notexpecting a detailed answer on each of thoseindividual points? Of course, I will let you know whatour detailed response is in writing.2

The only slightly wider observation that I wouldquickly make now is that because a country has notsigned a particular resolution, it does not necessarilymean that it does not have an enlightened policy inthat area. In terms of the conversations that I hadwhen I was in Brazil, my observations are that thereis a general feeling that significant progress has beenmade, that further progress still needs to be made, thatthere are groups in society who can feel excluded orunfairly treated, and that there may be a lag in someareas between social attitudes and the law—in otherwords, something may not be legal, but that does notmean it does not happen, and I am thinking about suchareas as domestic violence, for example. However,there seemed to be a high degree of awareness ofthose subjects, and the resolve to make progress. Ifelt like I was talking with a group of people—theparliamentarians and Ministers that I met—whoshared our views and our approach to such matters.As I said earlier, that has some wider benefits, as itdoes with international development, in terms of therebeing a new world player that may be listened to moresympathetically than Britain sometimes is, and whichmay be able to try and lead the debate in other partsof the world, where our values are not always soreadily shared by other countries.I felt that the Brazilians were in quite a good place onthose issues, and they acknowledged that where theywere not, they wanted to do better. However, you havegiven me more cause for concern, so I will reply tothe detailed questions, as you asked.

Q140 Mr Watts: Minister, you showed someconcern about the level of resources that you haveglobally. Does that reflect itself in Brazil? If so, whatproblems do you create by not having the resourcesthat perhaps some other embassies have?Mr Browne: I think Britain borrows more moneyevery weekend than it spends annually on globaldiplomacy—that is the context in which I was makingthose observations. Some government departmentshave rounding errors bigger than the Foreign Office2 See Ev 67.

budget, yet less than 1% of the world’s population livein Britain. All the other departments, apart from DFIDand Defence, have to deal with 1% and we get theremaining 99% to keep an eye on. As a result, wehave to make economies and efficiencies—I do notactually mean just this Government. I think that thisis, to an extent, over a period of time, a process thatmeans there are areas that we could look to do morein than we currently do.Having said all of that, let me make two quickobservations. First, some of those changes andefficiencies have strengthened aspects of our work.Some of our locally engaged staff cost us less toemploy, but give us a different understanding of thehost country, which can be beneficial. Secondly,within the Government, under the direction of theForeign Secretary, we have consciously looked to tryto adapt our Foreign Office network to take accountof the changes that have taken place in the world. Thetendency, or the risk, is to bring the Foreign Officenetwork up to date with now, then leave it for 10 yearsuntil we have the next review. Then, it goes more andmore out of date, until it is 10 years out of date, andyou bring it up to present again, then allow it slowlyto go 10 years out of date again. We are trying to getahead now and anticipate future changes in the worldand that is why we are shifting more of our fairlylimited resources into China, India and Brazil. It doesnot take a genius to work out that those countries areincreasing in importance, but we are trying to makesure that increased importance and anticipation of aneven greater increase in the future are reflected in theway that we deploy resources. Brazil is part of thatequation.

Q141 Mr Watts: Given that Brazil is one of the mainareas that the Government has identified financiallywhere they want to be and where they want tostrengthen, how many more posts have we in Brazilat the moment? How does that compare with some ofthe other missions? We talk about the French and theGermans having a start on us as far as competition isconcerned. Have we anywhere near the resources thatwe need to actually compete with them?Angus Lapsley: As the regional director responsiblefor this part of the world, I would obviously alwayslike a bit more to play with. But, when I look at ourBrazilian network and its impact in country, itcompares very well to other European countries. Thatis partly for the reasons to which the Minister referred.We deliver quite a lot through highly talented localstaff, whereas the French and German missions wouldprobably bring people over who, as Mr Stewartreferred to, might not necessarily speak Portugueseand might spend a lot of time at receptions, but notmuch time out there doing stuff. We feel that thenetwork has a high impact, but we are increasing it.To answer your specific question, we will be puttingprobably five to six additional diplomats into theBrazilian network over the next 12 months or so. Weare going through recruitment processes at themoment, making sure that they have the rightlanguage skills and things like that. In terms ofabsorption capacity and actually making sure that weare putting people in who have real jobs to do, that



feels about right to me—notwithstanding that I wouldalways like a little bit more.Mr Browne: May I add a brief supplementary?Consciously, when I visit large countries, I try to getaway from just visiting capitals. The ForeignSecretary and the Prime Minister are likely to go theprincipal city and the capital city if those are twodifferent places. I went to a city in the south of Brazilcalled Porto Alegre. We have one or maybe twolocally deployed staff there, but it is not a full-blownBritish consulate. I was there for only two thirds of aday, and they organised an excellent programme. Thelocal knowledge of the person who principallyorganised it was extremely valuable. As far as I couldwork out, she knew everybody who there was to knowin that city with 1.5 million people, and in whichBritain has some significant trade and cultural interest.It is not necessarily the case that the more expensivethe member of the staff and the more British they are,the more effective they are on behalf of Britain. Thatanecdotal example showed that we were able to getvery good value for money and a good presence inthat city.

Q142 Rory Stewart: I have a couple of thoughts. Interms of strengthening your strategic relationship, ondefence when was the last time the Chief of theDefence Staff visited Brazil? On Braziliandevelopment in Africa, why is DFID not putting moremoney into working more closely with Brazil inAfrica?Mr Browne: Pass on question one. Gerald Howarth,Defence Minister, has visited Brazil in the past yearsince the Government was formed. We have a defencerelationship, but I do not know when the Chief of theDefence Staff last visited. There is only one Chief ofthe Defence Staff, and there are a lot of countries inthe world in which Britain has defence interests, sothe Chief of Defence Staff needs a bit of time to thinkabout defence as well as travelling to countries in theworld where, I am sure, there is a huge demand forhim to be, were he able to arrive. We want to have akeen relationship with them and that is indicated byone of our Defence Ministers visiting reasonablyrecently.

Q143 Rory Stewart: DFID and Africa?Mr Browne: When I was in Brazil three or four weeksago, I attended a reception that may be illustrative ofthis point. There was a DFID programme to helpKenya, but a lot of the training with the Kenyans wasbeing done in partnership with the Brazilians. Thatwas seen as a potentially productive way of achievingthe objective. The reception, slightly improbably, wasfor lots of Kenyans who were in Brasília. Theprogramme was, from memory, at least in part fundedby DFID, so there are opportunities. I have never beento the north-east of Brazil, but I am told that if onegoes there, there is a greater sort of empathy withAfrica, just because of the geographic proximity. Thatis an area that I imagine DFID would like to explore.Angus Lapsley: I do not know when the CDS lastwent, but certainly the First Sea Lord was there lastyear. We have annual high-level staff talks betweenthe militaries as part of the defence treaty that was

concluded last year. DFID pulled out of Latin Americasome time ago, as part of its focus on the poorestcountries in the world, but the one place in LatinAmerica where it still keeps staff—I cannot rememberwhether it is two or three—is Brasília, precisely towork on this question of Brazil as a partner,principally in Africa, but not just in Africa. Brazil isan increasingly effective voice on a whole range ofglobal development issues.

Q144 Mike Gapes: Can I take you back to Brazil’sforeign policy and relationship with the UN system?President Dilma Rousseff was elected, or took office,at the beginning of January, and since then we havehad, as was already mentioned, the resolutions onLibya. I want to explore that a bit further, and go a bitfurther than where you were in the previous answer.One of the witnesses in a previous session said thatBrazil’s abstention on Security Council resolution1973 should not be interpreted as Brazil remainingfirmly in a non-interventionist position. I want toknow where you assess Brazil to be. Is Brazil fullysigned up to the responsibility to protect concept, oris it some way away from that? Why did it take theposition that it did—abstaining on Security Councilresolution 1973, but supporting Security Councilresolution 1970? Is that because it is uncomfortablewith the idea of the use of force?Mr Browne: That is a very good question. I cannotgive you a fly-on-the-wall account, because I am notthe Minister responsible for the United Nations. I amresponsible for Brazil, and as a result I was not partyto the details of those negotiations in New York.Rather than just leave it there, let me engage a bitmore widely on your point, which is that Brazil is notfully persuaded. If it was, it would not have abstained.There are a handful of countries in Latin America thatwe really struggle to see eye to eye with on thesematters. Brazil is definitely not one of those. Of theremaining countries, there are some that are moreenthusiastically and unequivocally in the position thatwe are in on these matters. I cited Colombia, becauseit had an opportunity to exercise a vote. Mexico wouldbe in that position as well. There are others that hangback, but are not hostile to our analysis of thesituation. That is where we are.I look at Latin America as a whole and regard it as anextraordinary success story. It is a continent that 25or 30 years ago—only a generation ago—had a largenumber of countries with basket-case economies runby autocrats of one type or another. It now largelyhas economies that are growing strongly, with deficitsconsiderably lower than our own, and democraticallyelected leaders. I suppose my point is that thecontinent as a whole, inasmuch as one can generalise,has moved massively in the right direction, as wewould see it, over an accelerated period of time.Different countries are at different steps in the processof how they respond to those movements, consolidatethem and analyse them. By and large, with one or twoexceptions, they have all moved in that directiontogether.

Q145 Mike Gapes: Can I take you back, though?The key point that I am trying to make is that Brazil



has an ideological view of the world that is non-intervention in other countries’ internal affairs. Thatwas explicitly stated on a number of occasions in thepast under President Lula. I am interested to knowwhether Brazil is now at least prepared to engage withthe idea of the responsibility to protect—notrhetorically, but actually in practice. For example, isthere any indication that Brazil is prepared to help inany way with the implementation or enforcement ofresolution 1973?Mr Browne: The honest answer is that Brazil is notfully in the place that you describe. If it were, it wouldhave behaved accordingly. I have had thisconversation—not with the Brazilians, but as a privateconversation, so I shall leave the person nameless—with someone from another country in Latin America.The conversation went along the lines of, “We are infavour of human rights and peace, and we are infavour of non-interventionism.” I said, “What happensif you need to intervene to protect the human rightsand the peace?” We moved on to the next course. Butthere is a debate to be had, and some of the LatinAmerican countries share my implied analysis in thatquestion, which was that there are times when you doneed to intervene to safeguard or advance our values.There are other countries that are not completelyhostile to that idea, but would prefer somehow to tryto reconcile those two, even when it is a struggle todo so. From observing, Brazil is in that position.

Q146 Mike Gapes: At Prime Minister’s questionstoday, the Prime Minister responded to a question bysaying that the Government was going to push, withthe French, a Security Council resolution on thesituation in Syria. Do you think that Brazil willabstain on that, or is it likely to support it?Mr Browne: I will answer, if no one else isvolunteering to do so first. I very much hope that itwould vote in favour of the position that the PrimeMinister outlined, for the reasons that I have justexpressed.

Q147 Mike Gapes: I did not ask what you hoped; Iasked what you thought would happen.Mr Browne: It will be an interesting test of whetherBrazil has moved further down the track. I hope thatit has, and that it will vote in the way that the PrimeMinister described, but that is a decision for Brazilto make.Angus Lapsley: Intervention means many differentthings. Clearly, many Latin American countries areuncomfortable with hard-edged intervention. That ispartly to do with their own post-colonial histories, andthey have a strong sense of the importance ofpreserving the integrity of national sovereignty. Weunderstand that, but there are other ways in whichthey can help. One of the things that we have beentalking to Brazil about is the way that it, as a modelfor economic and political transition, in common withmany other Latin American countries, has an awfullot to offer the Arab world as it goes through its ownpolitical and economic transition. Perhaps it is in thatkind of way that those countries can most helpfullyget involved, at a stage when their public opinion and

political culture are not yet in the position of beingready to accept the harder edge of intervention.

Q148 Mike Gapes: That might be in certaincountries—say, Egypt or Tunisia—but you are nottalking about Libya at this stage, are you?Angus Lapsley: Maybe not at this stage, but Brazilhas significant interests in Libya; it has quite asignificant oil presence there, for example.

Q149 Mike Gapes: Is that why it abstained?Angus Lapsley: Like many of us who have interestsin Libya, it had to balance those interests and thinkabout how it responded. My point is that, as Libyamoves forward in its transition as we hope it will,the Brazilians and others in the region have a rolein supporting economic growth and reform in thosecountries, as well as helping them to build asustainable democracy after years and years ofsomething else.

Q150 Mike Gapes: There was a reference to theposition that was taken on human rights in Iran. I aminterested to know whether there is a follow-up tothat. Are we likely to see a repetition of the newBrazilian President meeting and having photographswith the President of Iran in the future, as happened ayear ago? That was controversial. Also, are we likelyto see a repetition of the initiative that Brazil took atthat time with Turkey on the Iranian nuclearprogramme? Is there a view on how that has beenperceived? Do we have an assessment on whether thatapproach is now seen to have been a mistake andwhether Brazil is now moving, because of this stateposition on human rights, to a slightly differentapproach?Mr Browne: My hope is that we will not see a repeatof that photo with the new President of Brazil. Thatis not in Brazil’s interests, and I hope that Brazil seeswhy Britain and other countries take the view that wetake on Iran for a whole range of reasons, with humanrights high on that list, but also including nuclearproliferation and other concerns that we have. That isnot to say that I do not think that Brazil should havea wide and ambitious foreign policy. It is entirely upto Brazil to have that.I do not want us to feel that it is only countries likethe United Kingdom, France and the United Statesthat are allowed to have a global view and thatsomehow the Brazilians should not be thinkingbeyond their own continent. It is entirely legitimatefor them to have that wider role, but it is how theychoose to exercise that wider role. My view is that thechoice they took a few years ago was not wise. Votingon the Special Rapporteur on Human Rights was theright way to go and the best decision that they couldhave made. I hope that that is indicative of Brazilusing its global role in ways that are more compatiblewith our objectives in the future.

Q151 Mike Gapes: It was a year ago, when PresidentLula made his initiative. At that point, for the firsttime ever, Brazil voted against the US. Someacademics interpreted that as a symbolic statement of



third-world solidarity against the US. Is that the viewthat we take?Mr Browne: I do not think that Brazil would regarditself as being part of third-world solidarity, but it maywell regard itself as not having automatically tofollow a leadership set for the Americas as a whole bythe United States of America; that it is an independentpower with its own ability to make decisions and tocome to conclusions without being in harness with theAmericans. That is true. There is no reason why itshould be subservient to the United States or othercountries. I would hope that in coming to thoseindependent conclusions, it would be guided by thesame considerations that countries like the UnitedStates or Britain have. It comes back to my earlierpoint that having a global role comes with all kindsof practical difficulties and obligations, as well asopportunities.

Q152 Mr Watts: We have heard that Brazil wants toplay a more important role on the world stage and wehave talked about the likelihood that they would wantto expand their military capacity. We have also heardthat it is unlikely that they would want to develop anuclear weapon system. Is that still the view? Whatsort of military presence does Brazil want to develop?Mr Browne: That is my understanding. When I visitLatin America, I am struck that there seems to be avery high degree of attachment to the concept of LatinAmerica being a nuclear-free continent. I have notheard any particularly strong or compelling voiceswithin Brazil or other Latin American countries thatare arguing for a different approach. I would envisage,therefore, that Brazil would have an increased militarycapacity, which would reflect the fact that in the nextfew years it will become the fifth largest economy inthe world. It already is, by a big margin, the biggestforce in its particular continent, and it may well seekto have a military capacity that, as I say, in some wayreflects that status. However, nothing that I have heardsuggests that I should envisage them having a nuclearweapons capacity.

Q153 Mr Watts: Turning to other areas where theymay want to develop, one of the things that we coulddo or that we could have done is to support thenomination of a Brazilian for the IMF,3 for example.Is that something that we actually considered or is itsomething that we do not think is desirable? Issupporting them in global institutional jobs, such asthe one that I have just outlined, something that wethink will help to lock in Brazil?Mr Browne: As I understand it, the lead departmentin Government on that specific decision is theTreasury rather than the Foreign Office. In generalterms, however, we certainly do not have an antipathyto Brazilians occupying influential internationalpositions. As I said, there are many Brazilians in theircivil service and their public life who have a highdegree of aptitude and experience, and where the mostsuitable candidate for a particular position is aBrazilian, I could not imagine any reason, in the vastmajority of circumstances, why that person would notbe the person who ought to occupy the post. The point3 International Monetary Fund

that I am making is that there is no general policy thatwe, the Europeans or the G8 countries, need to try andhoard all of the positions of international influenceand ensure that the emerging powers do not start toget their hands on those jobs. If there are good people,we should consider them.

Q154 Mr Watts: I was not saying that we wouldoppose it; I was merely trying to ask whether wewould actually actively support such a nomination.Mr Browne: I could envisage circumstances—Mr Watts: Do we work with the Braziliangovernment to actually support their applications forthose sorts of posts?Mr Browne: In my limited experience of a year in thejob, I am quite struck by how energetically countrieslobby for their person to be considered for aninternational body. We get representations forcefullymade, and at every single bilateral meeting “Pleasebear in mind the qualities of our particular candidatefor this particular post” comes up on the agenda.Normally, there are three or four people in the runningand all the countries are lobbying for it. All I amsaying is that we do not have a list of preferredcountries. We do not have a predisposition to alwayssupport the European or someone who comes froman English-speaking country or whatever other reflexstarting point we might have. If the best person for ahypothetical global job was a Brazilian, I cannotforesee why there would be any barriers to ussupporting the Brazilian.

Q155 Mr Watts: But would it be a good idea for usactually to talk to them about their ambitions, whatthey would like, and how they see their roledeveloping to take into account their growth ineconomic terms? Would it be a good idea to be seenas someone friendly to them and someone supportive,who will actively assist them in their policies? Thatwould, in a way, assist our policies in Brazil.Mr Browne: I have no objection to that. Those areexactly the sort of conversations that we could have.We are seeking to demonstrate exactly that type offriendliness across a whole range of subjects on adaily basis. I do not measure friendship purely interms of the number of people whom we support fornominations to international bodies, but the Brazilianscertainly should not think that we have any antipathyto Brazilians occupying important international posts.On the contrary, we would be enthusiastic, and wewould judge the candidates on their merits.The wider point is that, if anything, we might have apredisposition to support Brazilians or others fromLatin America, for the reason that I gave about 10 or15 minutes ago. If you look at the world 25 or 30years ago, when I was growing up, one of the bigchanges, of course, was the reunification of Europeand the end of the Soviet Union, just under 22 yearsago. The other extraordinary change, which iscommented on far less and relates to the advance ofdemocracy, if I can put it in those terms, is LatinAmerica, which has undergone a completetransformation. In terms of it being a values ally, if Ican put it in those terms, for Britain, Europe and NorthAmerica as a whole, and an important counterbalance



in global affairs, we are in an extremely fortunate andhappy position.I will give you a counter-historical narrative. Imagineif it had all gone in the other direction; we would belooking at a very bleak position indeed. Countriesright across Latin America, including Brazil as thebest or biggest example, have embraced free marketeconomics. They have broadly embraced free trade,democracy, civil liberties, free media, and all the othervalues that we regard as important in this country,which is a huge step forward. We have no inclinationnot to support Brazilians. Actually, because we arevery enthusiastic about that process, it may well bethat a Brazilian, as a hypothetical person for ahypothetical job, would be someone we were veryenthusiastic about.

Q156 Mr Baron: There have been big oil discoveriesoff the coast of Brazil, if I may just turn us to theissue of trade, and the effect that trade can have onBrazil’s economic and foreign policy. The twists andturns have been interesting, with regard to Brazil’sdecision on whether it will join OPEC. That has beenlinked to its desire to be a permanent member of theSecurity Council. How do you see the larger oildiscoveries impacting on Brazil’s economic andforeign policy?Mr Browne: Brazil is a very interesting country, inenergy terms. I wrote down some statistics, becausethey tell a compelling story in their own right. 80%of Brazil’s electricity is from hydro power. It says onmy list that it has “strong potential” for wind, solarand wave power, which presumably means that it hasnot developed them properly, but Brazil clearly has allthose advantages. It also produces a huge amount ofbiofuel, so it is in a position where it is meeting avery high amount of its existing energy needs fromrenewable sources. At the same time, it has thepotential to be a major world oil power.Again, I am told that by 2015, it is possible that Brazilwould be in a position where it is the sixth biggestproducer of oil after—get this—Saudi Arabia, Iran,Iraq, Kuwait, and the United Arab Emirates. It wouldbe the largest power in the world outside that hub inthe Middle East, which would change the way thatpeople perceive Brazil. That would change Brazil’seconomy, but of course, the difficulty then is how thattransition could be made in a way that supports much-needed infrastructure development, education, andother areas in which Brazil needs to improve in orderto move forward economically. It would provide a lotof opportunities for British businesses, which isalready the case with BG and BP. As I say, it alsoaffects 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 anythingyou have said, because that would change people’sperceptions, but how do you think it would affectBrazil’s foreign policy? For example, why do youthink that, to date, Brazil has refused to sign up toOPEC? What is the logic behind that?Mr Browne: I do not know. To be honest, it is not anarea that I have read analysis on—the reasons why

Brazilians think the way they do on OPEC—so I amhappy to seek guidance from people.

Q158 Mr Baron: Perhaps somebody else wants totake that up.Angus Lapsley: Perhaps Vivien can reply to thespecific OPEC point. On the foreign policy point, itprobably does, or will, lead to a reinforcement ofBrazil’s sense that it is arriving on the world scene,and that it has the means—the wherewithal—tooperate on it. To come back to Mr Watts’s questionabout defence priorities, that is clearly a big factor,and one of the main areas it will invest in is the blue-water naval capacity to protect its offshore assets andso on. That will skew things. What you will not seeis what we have seen in Venezuela, for example,which has used its oil money to pursue a veryinterventionist and quite idiosyncratic foreign policyaround the region. I do not think that is Brazil’s styleat all.

Q159 Mr Baron: There is quite a difference inapproach.Angus Lapsley: Exactly.Vivien Life: We also have to look at how it is makingthat decision. In the end, it is a decision for Brazilitself. We would hope that as it increasingly becomesa supplier of oil, it will work closely with us on ouragenda of how we try to respond to oil price volatility.We want to talk to Brazil about what kind ofrelationship it might want to have with the IEA,4 asthe IEA tries to tackle issues such as fossil fuelsubsidies. We have been saying more generally thatwe want to work in partnership with Brazil ininternational institutions because we have commoninterests, and want to consider how it might work withus in the IEF.5 We will be keen to build thatpartnership with Brazil, and we have stepped up thatpartnership on energy with a high-level energydialogue, trying to address some of the issuescollectively. We want the growth in oil production tobe an opportunity that we seize on early; it is not justan opportunity for business, but from the point ofview of energy security, we want to work with allmultilateral institutions that cover oil.

Q160 Mr Baron: On the OPEC front, there is a viewthat Brazil is perhaps trying to increase its room formanoeuvre. As the level of the oil price goes foreverupwards, there is a need for OPEC members tobalance their budgets. That gives the Brazilians a bitof leverage if they are outside OPEC when it comes,perhaps, to influencing the oil price. That is perhaps adebate for another day.Minister, you mentioned that you would like to seeBritish trade increase—I think you mentioned £4billion from £2 billion. How was that figure arrivedat? It seems to me that if you take the French orGerman models for promoting trade overseas, theyhave had more success than we have, certainly inLatin America, for a variety of reasons. I do not thinkthat is due only to historical or cultural links, but thosecountries have a closer working relationship between4 International Energy Agency5 International Energy Forum



Government and industry in promoting industry andwinning exports. How will we catch up? How will wedouble that figure, and how was the figure arrived at?Mr Browne: I am sure there are all kinds of clevercalculations that arrive at the number being preciselydoubled, rather than it being selected for morearbitrary reasons. Let me make a wider point. Astatistic that is often quoted—I have heard the PrimeMinister say it—is that Britain does more trade withIreland than with China, India, Brazil and Russiacombined. Everybody gasps at how astonishing thatis, but it does suggest that we are still in the foothillsand at an early stage of globalisation. We tend to thinkabout what it is like to live in a globalised economy,but actually we are not in a fully globalised economyat all. In 20 or 30 years’ time, people will look backand think that it was an extraordinary delusion for usto think in 2011 that we were in a globalised economy.Even though countries are obviously going to do moretrade in some areas with their immediate geographicneighbours, actual scope for trade with a country likeBrazil, which has 190 million people and is growingmore strongly than countries in Europe, is very high.We can try to improve our trade position through anumber of means. Partly, we have to try to ensure thatwe win an overall values debate. I do not say thatthere is hostility in Brazil to that, but Britain is one ofthe leaders in the world in arguing for free trade andopen markets. We even have difficulties sometimeswith the United States in this discussion. Certainlywhen the European Union is looking to negotiate tradeagreements, Britain tends to be at the forefront ofarguing for more open markets and more free trade.We need to make sure that that argument isintellectually won around the world, which is sadlynot the case at the moment.We need to make sure that the business environmentimproves in Brazil. These are all general points, andthey would apply to Germans and Italians as well. TheWorld Bank has rated Brazil as the 127th most easycountry in the world to do business in. The complaintthat you will hear when you are in Brazil is about thepractical difficulties of trying to do business, and someof that may be about lobbying for individualbusinesses and individual contracts. We should notforget, of course, the smaller businesses that arelooking to expand; it is not just about the prestigeprojects that leading politicians have photo ops withwhen they go to countries, but the smaller ones thatare not so immediately apparent.Affording attention to Brazil is important in terms ofhow we are perceived in Brazil, but I also think thatit is important in terms of how Brazil is perceivedhere. The week after next, the Deputy Prime Ministeris 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 numberof vice-chancellors and business people are going, aswell. The greatest value that I attach to that is thesame point as I made earlier: if you had a league tableof continents of the world, people in Britain—not justthe British Government—would, if they were honestwith themselves, put Latin America bottom of thetable.

If you ask a lot of businesses what globalisationmeans to them, they say “China” or “Vietnam”. Theylook east; they do not look south-west. Quite a lot ofbusinesses could do very well in Latin America, buthave not particularly thought to expand there. In somecases, that may be because the Americans got therefirst or the market is already at a high degree ofsaturation, but in other cases it is just because the pathhas not been particularly well trodden by Britishbusinesses. When talking to other business people inBritain, therefore, we do not tend to end up sparkingup a conversation about opportunities in Brazil orother Latin American countries because theconversation is all about what is happening in SouthKorea, Thailand, Indonesia or wherever.We are keen on having an EU-Mercosur tradeagreement, and there is value in general UKTI-styleevents. We had the Foreign Office so-called leadershipweek about three weeks ago when our ambassadorsand heads of mission from all round the world wereback in London. As part of that, for example, oneevening we had an event in the City of London towhich all the Latin Americans were invited, alongwith the British ambassadors who had come home,Latin American ambassadors here in London, and lotsof businesses that are investing in Latin America. Iam not saying that that, in itself, transforms our traderelationship, but I am not dismissive of those events.They can add value, as well. We need to try to workacross the piece.To return to a point that I was making about an hourago, there are aspects of Britain’s offer that couldbecome increasingly relevant and compelling toBrazil. Probably the second most popular sport inBrazil after football is Formula 1 motor racing. Iremember having this conversation with the BrazilianForeign Secretary. I said, “Isn’t it striking that mostof the famous European car brands are German andFrench, to an extent, but that nearly all the Formula 1teams are based in Britain?” A lot of the technicalexpertise that I was using to illustrate that point isrelevant to a country as it goes into that stage ofdevelopment. Brazil is, I am told, regarded as the mostimpressive country outside the G8 for scientificinnovation, and we have an increasing amount ofcollaboration on scientific research. Service-basedindustries will become more important—that is a typethat Britain is strong at. There are lots of cultural-educational links. It may well be that in addition toour specific targeted efforts, the Brazilian economywill start to become more compatible with whatBritain has to offer, so we will get a perfect coming-together of conscious efforts by the Government andthe requirements of the Brazilians.

Q161 Mr Baron: Do you accept that in the past,British companies trying to win business have had alaissez-faire approach, and that we need a more co-ordinated approach to bring some coherence? MrArmour of UKTI suggested that, and said that theywould try to make efforts in that direction. Is thatsomething the FCO, in its somewhat limited capacity,can encourage, and what improvements do you thinkit can make?



Mr Browne: I personally have some sympathy for thatapproach. Let me explain. Having a systematic co-ordinated approach to trying to make sure that Britishbusinesses have an introduction into the market place,being able to share with them our understanding ofbusiness opportunities, but also a wider understandingabout where their labour market is placed, where theirskill shortages are, what the cultural barriers are toinvestment, and lobbying the Brazilians to try toaddress market access issues that may be particularlydifficult for British businesses—in all those areas, Iagree with the premise of your question. The onlything that holds me back from signing up to it 100%is that businesses are successful if they can producegoods and services that people want to buy, at a pricethey want to pay. I want Brazilians, and for that matterother people in the world, to buy British goods andservices because they’re the best goods and servicesavailable. We can lobby as much as we like, but if wedon’t have products that people want to buy at pricesthey want to pay, they won’t buy them.There is an important role for a co-ordinatedgovernment approach, but I wouldn’t underestimatethe important role of innovative businesses coming upwith superior products to those offered by French orGerman businesses.Angus Lapsley: May I make three points? First, onebit of the strategy on Brazil, which is not secret, is theestablishment of a high-level CEO forum of Brazilianand British business people working to address thebarriers that might exist, and to raise awareness of theopportunities that exist. Secondly, I am notresponsible for UKTI’s resources around the region,but it is looking at its presence in Brazil, and whetherthere are more areas they should move into and morere-enforcement they should do. Thirdly, all this takestime. 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 Americawhere you can pitch up with a good idea and dobusiness. You really have to work the Braziliansystem.Going back to what the Minister said earlier aboutBrazil scoring badly as a place to do business, a lot ofthat is to do with the fact that it’s a place where ittakes time to build relationships, to get round thebureaucracy, and to work out the best way of workingthrough local culture. I think we will work on thatover a long period to get results.

Q162 Chair: Will we be using the Olympics topromote trade between Britain and Brazil? Minister,you will remember that you gave evidence to us a fewmonths ago on the opportunities posed by theOlympics.Mr Browne: Yes.Chair: Would you like to elaborate?Mr Browne: If I had a gold medal for every time Italked to Brazilians about the Olympics, I would bein the Steven Redgrave category daily. The Olympicsare a big opportunity for us. The Brazilians are excitedto be hosting the Olympics and the 2014 footballWorld Cup. They are the two main global sportingevents, and the Brazilians are hosting them back toback, for the first time in history, as far as I am aware.

They are enthusiastic about the lessons that they canlearn from us about the Olympic Games in all kindsof areas.One must get away from just thinking of the Olympicsas a sporting event where people try to run as fast orjump as high as they can. In these terms, it is amassive business opportunity in all kinds of areas—project management, design and security. Sellingmillions of tickets on the internet for example throwsup all kinds of issues about cyber-security, bankingand distribution systems and pricing mechanisms. Iam sure that the media here can find areas where theyfeel that the system could be improved, but if you stopto think about it, this is an event with multiple venuesand we are selling literally millions of tickets over twoand a half weeks. Logistically, that is a verycomplicated exercise, which is potentially prone tofraud, for example, and to other abuses. We aresharing information in all kinds of areas, and they arelearning from us. There are potential businessopportunities that go way beyond thinking about it asa sporting event.The Olympic park in east London is a great showcasefor British ingenuity in design and projectmanagement. I showed the Brazilian Ambassadoraround the park, and he seemed very impressed withthe ideas that we had. We are working closely withthem at lots of different levels and will continue to doso. Brazilians will see it in receptions a year before thegames and no doubt there will be pictures in Braziliannewspapers. It is a nice showcase for Britain in thatway, but there is a much more detailed workingrelationship with the Brazilians, because they aretaking over the games from us in 2016.

Q163 Mike Gapes: May I ask briefly about theenvironmental issues? Brazil has made efforts totackle climate change. It is an important countrybecause of the size of its forests and its sheer scale.What are we doing to support Brazil in its efforts onclimate change?Mr Browne: May I start by agreeing with the premiseof your question? Again, I have rustled up somefascinating facts, including that the Amazon is largerin square mileage than the EU. I do not know whetherthat tells you anything or whether you are interested,but it gives you a sense of scale. Certainly, theBrazilians regard their natural inheritance as one ofthe defining features of their country and are rightlyvery keen to preserve and protect that inheritance. Wework closely with them on that.I am encouraged that President Rousseff is a keenchampion of pro-environmental, climate-change-mitigating policies. We work through our embassy inBrasília on projects and in areas where we think thatwe can be of value to the Brazilians, including theenergy aspects that Mr Baron discussed a few minutesago. In terms of a manifestation of that, when I spoketo our Climate Change Secretary about the CancunSummit, I was struck that he said that the closestpartnership he had was with the Brazilian. You mightthink that it would have been with another European.It suggests a positive expansion of our role in thisarea.



Q164 Mike Gapes: There has been a report in thepast 10 days about what they call a “crisis Cabinet”being established as a result of a 27% increase indeforestation in the Amazon in one year, principallyin Mato Grosso, I think. How concerned are you aboutthat? It has been suggested that there is a move in theBrazilian Parliament towards loosening the legislativerestrictions by moving down from 80% to 50% on theprotection of the forests of the Amazon. Do we havea view on that? Are we making representations? Whatdo you think will happen? Is it clear that the BrazilianParliament will go that way? If so, what are theimplications?Mr Browne: Yes, we do have a view. Yes, we areconcerned. Yes, we are making representations. Myunderstanding is that this is a live debate, which weare keen to influence—primarily, it is an internaldebate within Brazil, although it has widerramifications. Our understanding is that the Presidentis in a very strong or resolute position, which weapprove 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 meetthe more onerous end of the targets—the 80%reduction, rather than a less ambitious reduction. Ona scale of how environmental someone is, she is onthe most environmental end of the scale, and we arehappy she is in that place.

Q166 Mike Gapes: We have been told by academicsand others that the percentage will be reduced from80%, but the question is how far it will be reduced. Ido not know whether that is true.Vivien Life: That is not our understanding. The 80%is a domestic commitment, but Brazil has madecommitments in the UNFCCC6 for an overallreduction in carbon emissions, and its 80% target withregard to deforestation makes up 50% of its ability toreduce emissions. So at the moment, Brazil isbound—not legally bound, because we don’t have alegally binding UNFCCC, but, given how Brazilwants to position itself as a leading green country, itis unlikely to want to retreat from the targets it iscommitted to in the UNFCCC. But, as the Ministersaid, the recent figures are worrying. It is a politicallydifficult thing for the President to deliver, given wherethe Parliament is. We will be doing all we can tosupport Brazil, politically and technically, indelivering its commitments.

Q167 Mike Gapes: When you say help, do weactually send experts to give advice, or should we belistening to the Brazilians, given that it is their climateand that they might have a better understanding of itthan we do?Vivien Life: We let them ask us for what help theywant. We would not presume to send expertise thatwasn’t asked for, but we have this close relationshipand partnership. When Caroline Spelman visitedBrazil, we talked about potential funding for policiesto tackle deforestation and so on from the UK’sclimate 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 aboutsending experts unless we are asked.

Q168 Sir John Stanley: Should not the ForeignOffice and the British Government as a whole bedoing much more to bring home to the British peopleat large the critical connection between preservationof the Brazilian rain forest and our own position herein the UK? Is it not the case that very substantial costswill be falling on British taxpayers and Britishelectricity consumers—are falling on them now—as aresult of the British Government’s targets to reduceCO2 emissions? Those costs and the sacrifices madeby the British people will be shown to be absolutelyfutile unless, first, China is weaned off its coal-firedpower station programme and, secondly, the Brazilianrain forest is protected. Should that message not bemade much more clearly by the British Government?Mr Browne: This is a big subject. I feel that theClimate Change Secretary is best equipped to giveyou a detailed answer, but let me make a fewobservations.I think that there is value in Britain demonstratingglobal leadership. We have almost 1% of the world’spopulation and account for about 2% of the world’scarbon emissions, so it is true that 98% of the world’scarbon is not emitted by us but, on the other hand, weare emitting more than double the amount per capitaof the global average. There is a reasonablycompelling case that we could do better and showgreater leadership, and that that would beadvantageous to us. The economies in the world thatwill be well equipped to prosper in 10, 15 or 20 years’time will not be those belching out large amounts ofblack smoke but those which have got ahead of thegame in being innovative and preserving energy.I note, just this week, the German plans forreconciling their views on nuclear power and futureenergy requirements. There is a big gap there that itwill need to fill with greater energy efficiency andmore renewables. That is a potential opportunity forit if it gets into areas where there is high demand inthe future for more energy efficient products. It isovertaking us in that regard, so we need to be mindfulof that.China, of course, has a huge population. It argues,rightly, that it emits far less per capita than the UnitedStates, but it is catching up in a way that should, anddoes, give us cause for concern. Having said that, Ithink sometimes the British view of China, when itcomes to renewable energy and the means for tacklingclimate change, lacks appreciation of some of themeasures that it has taken. I was very struck, when Iwas on a train journey through China a few monthsago, how virtually every house I went by had solarpanelling on the roof, in a way that you would neversee on a train journey through Britain. There is quitea high level of alertness to these issues in China. Thatdoes not mean to say that more cannot be done, but itis not unequivocally in a place that we woulddisapprove of.I also take your point about the Amazonian rain forest,which is why we make this point forcefully to theBrazilians. I do not think that they are in the opposite



place from us, both because they share with us thewish to address concerns about climate change, butalso for the reasons I mentioned about them rightlyfeeling proud about their own natural inheritance. Ido not think that the Brazilians wish to degrade theAmazonian rain forest, but it may well be that a wholeseries of incremental, small measures taken byindividuals lead to an overall degradation, which isnot what the overall government policy would wish itto be. So what we need to do is ensure that theBrazilians have the systems and the continued resolveto tackle a problem that we agree, with them, needsto be tackled. That is a long answer, but it is quite abig subject.

Q169 Sir John Stanley: It is. I want to raise withyou just one other aspect of this. Minister, earlier onyou referred, in answer to another question, to the wayin which Brazil has become an absolute major inbiofuels, as has the United States. Minister, would younot agree that there are two huge downsides onbiofuels? First, it is, of course, a spur to land clearanceand potentially to deforestation, which is the verything that you want to stop happening in Brazil, asland is cleared for crop growing. Secondly, every bitas important if not more important is the fact that, ifyou devote land for growing crops which you aregoing to pour into petrol tanks and motor vehicles andnot enable people to have food, you then produce areal spur to world food prices which hits the very,very poorest people. Those are two really majordownsides in the Brazilian march into biofuels. Is theBritish Government relaxed about that? Is the BritishGovernment trying to persuade the Braziliangovernment, for those reasons, to modify its rush intobiofuels? What is the British Government’s positiontowards this?Mr Browne: Let me bring Vivien in, in a second. Ithink I would say that they are two potentialdownsides, rather than automatic downsides. I acceptthat, if huge acreages of virgin rain forests are beingcleared in order to make way for growing biofuels,that is taking two steps back before you take one stepforward in terms of your contribution to addressingclimate change. If, on the other hand, biofuels arebeing 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. Ithas the capacity to grow food way in excess of itsown domestic requirements and already does so, butit could grow a lot more still without clearing rainforests in order to do it. So I would not automaticallyassume that the consequences of growing biofuels willeither be to ruin rain forest or to lead to Brazil failingto match its potential in terms of food production.There is a risk in both those regards and you are rightto highlight that risk. That is the risk that we need tobe mindful of.Vivien Life: It would be wrong to set this up as theUK telling Brazil what its responsibilities are. It issomething that Brazil is herself very conscious of. Asinternational standards for what constitutessustainable biofuels are being developed—not least bythe EU—Brazil should be part of that debate aboutwanting to develop standards, because we believe thatBrazil’s biofuels are a lot more sustainable than someelsewhere. So, again, it is an important issue that wecan address through our high-level energy dialogue.We can ensure that we have a mutual understandingof this. We do see biofuels as an important part of theenergy mix if we are going to meet the carbonemissions targets that we were talking about earlier.Chair: I thank Mr Lapsley, Mrs Life and yourself,Minister, for coming along today. It is very muchappreciated. We are off to Brazil at the weekend andwe go there much wiser than we would have done ifyou had not come. Thank you very much, indeed.Mr Browne: May I say quickly Chairman that I amgenuinely pleased that you are going? It sends animportant signal that the Committee is taking aninterest in Brazil. Certainly, a constant theme of myconversations in the Department and wherever I go ismy desire to see greater attention given by Britishpublic opinion and the British Parliament to Asia,Latin America and those parts of the world that areevolving quickest. We should not just contentourselves with the more familiar set of countries thatwe have grown familiar with over recent decades. Iregard your interest as an entirely welcome andhelpful part of that process. Have a good time.Chair: Thank you. We appreciate the support givento us by the Foreign Office generally.

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Written evidence

Written evidence from the Foreign and Commonwealth Office

Summary

Brazil has arrived as a global power. The Government is energetically working towards a step change in theUK-Brazil relationship, promoting national interests under both prosperity and security agendas. A sustainedprogramme of Ministerial visits in both directions underpins this work. Brazil presents significant opportunitiesfor 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 onmajor foreign policy issues.

Canning Lecture and Emerging Powers

“History teaches us that Britain has a track record of underestimating Latin America and neglecting itsopportunities. 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 thetheme of “Britain and Latin America: historic friends, future partners”. He set out Britain’s strong historicalassociation with the independence movements of Latin America, including negotiating terms on Brazil’s behalfwith Portugal, and the many reasons why Britain should engage more closely with the region today. After aprolonged period in which the UK had considered Latin America outside of its sphere of influence andneglected 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 ofthe Emerging Powers. It is now the 7th largest economy in the world, and due to be the 5th within the nextdecade. It has a population of 200 million people, and a very favourable demographic profile for the next 30years. 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 ForeignSecretary’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 PaulineNeville 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 ForeignSecretary unfortunately had to postpone a visit to Brazil planned for April, due to the Libya crisis.

4. Brazil was on the agenda of the first National Security Council sub-committee on the Emerging Powers(NSC(EP)), along with China. The sub-committee agreed a more strategic, cross-Whitehall approach to Brazil,with an ambitious agenda that aimed to deliver a step change in the relationship by 2015. This is intended tomaximise UK benefits from Brazil’s growth and prosperity, while developing an enhanced security relationshipwith 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-techspin-outs and SMEs.

— Build on common support for free trade to deliver an ambitious EU-Mercosul FTA, and progresstowards a successful Doha round.

— London 2012 increases positive perceptions of the UK in Brazil, 50% more Brazilian touristsvisiting 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 Counciland in other bodies.

UK-Brazil Bilateral Relations

5. The bilateral relationship between the UK and Brazil is good, but under-developed. Strengthening tieswith Brazil will help to promote a range of UK interests. Brazil is a rising economic force, has a growinginternational voice, is an environmental superpower and a development success story. Brazil is already courtedby 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

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wants access to UK capital, technology, science, universities and knowledge of how to run major sportingevents. Brazil increasingly wants to exchange views on domestic policies (fiscal, health, drugs, energy, anddefence).

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). Thereare also small commercial offices in Recife and Porto Alegre. There are currently 28 UK-based staff in thenetwork, 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 animportant point of contact in the relationship. Brazilian organisers at the state and federal level have a keeninterest in seeing firsthand how the UK has prepared itself, which in turn provides significant opportunities forUK businesses involved in London 2012. The Football World Cup in 2014 will be held in Brazil, with attendantchallenges in infrastructure projects and public security. It is estimated that Brazil will spend £17 billion insports-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 (LulaIgnacio da Silva). She succeeded in the Presidential election with Lula’s personal endorsement, having gainedprominence 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 keypositions, and emphasising continuity particularly in economic policy. She has thus far lived up to her reputationas an efficient administrator, handling the crisis of massive fatal flooding and landslides in Rio de Janeiro withan effective, hands-on approach. It is helpful that the economy seems to continue in its good health—growthwas 7.5% in 2010, and forecast at 4.5% for 2011. Since taking office her approval rating has climbed to itscurrent level of 73%.

Trade

11. Brazil has a diverse economy, with industrial products making up the majority of exports, and a strongdomestic services sector. It is an agricultural and food security superpower—producing and/or exporting moresugar, soya, chicken, beef, coffee and bioethanol than any other country—with considerable scope for furtherenvironmentally sustainable growth. Brazil has the most-cited science base outside the G8. Its researchinstitutes make Brazil a world leader in agricultural research, as well as bio-science, although its ability totranslate 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 socialprogrammes), more in line with developed economies than the other BRICs. A growing middle class providesa potential market for goods and services the UK can offer. Brazil weathered the global economic crisis betterthan Europe and North America.

13. Brazil is committed to greater world trade liberalisation, including successful conclusion of the Doharound. Brazil’s most important trading partners are the EU (22% of trade), China, the US and Argentina (in thatorder). 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 fromUK companies increase by 500%. There was a 23% year on year increase in UK goods exported to Brazil in2010. 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 ofdoing 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 activityoverseas. The UK currently ranks only 26th as a destination for Brazilian investment according to availablestatistics, although anecdotally it is clear that inward investment is higher than that. The true level may bemasked by the financial flows sometimes through third countries. It was a positive sign that the BrazilianNational Development Bank (BNDES), which has three times the capital reserves of the World Bank, choseLondon as the site of its first international office outside the region. The science and technology sector in theUK, 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 itsfreshwater and a third of its biodiversity. This, combined with its achievements in reducing deforestation (ratesdown 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 toa low-carbon, green economy a reality.

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17. Brazil has adopted ambitious national targets to reduce carbon emissions, especially through reducingdeforestation by 80%: they are on track to achieve these. The UK is a strong partner on the range ofenvironmental issues—biodiversity, sustainability, climate change—as evidenced by the recent visit of theSecretary of State for Environment, Food and Rural Affairs. There was exemplary Brazil/UK co-operation atthe Nagoya biodiversity and Cancun climate change meetings in 2010.

Energy Security

18. Brazil is expected to become a major oil exporter over the next decade, following the discovery of upto 50 billion barrels of off-shore “pre-salt” oil. The pace of production may depend on the supply chain.Petrobras plans investments of £230 billion up to and beyond 2014. UK companies such as BG Group (the topforeign investor in the sector) are committed to this opportunity. Shell and BP have recently made majorinvestments in ethanol production.

19. This transition towards oil exports could conceivably threaten Brazil’s strong renewable energycredentials, though that seems unlikely given the central role of renewable energy in the economy. PresidentRousseff has taken a personal interest in the management of revenues from the pre-salt oil, and looked to theexperience 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, forfear of creating resentment. Brazil increasingly sees itself as having a global, rather than regional role. FormerPresident Lula carefully maintained good relations with President Chavez of Venezuela and the rest of theALBA countries, even while pursuing very different economic policies. The relationship with Argentinacontinues to be important.

22. Brazil’s approach to foreign policy is driven by support for multilateralism, a rules-based internationalsystem and respect for other countries’ sovereignty. Brazil considers the current multilateral system designedin the developed world’s image and not reflecting the reality of the 21st Century. The rise of the G20 hasboosted their hopes of reshaping such global institutions. Brazil wants the G20 to be the pre-eminent forumfor 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 UNSecurity Council (it is now in the second year of a non-permanent seat). The UK supports this aspiration, aspart of a reformed Security Council.

24. Brazil is a keen member of the BRIC, BASIC and IBSA informal groupings, seeing them as valuable toBrazilian interests and a lever to hasten reform of the world institutions. It will continue to be active andinfluential in these groupings, and new ones which might emerge on other issues. Brazil is also a leading voiceon development and is a keen advocate for the rights of developing countries, particularly in relation tointellectual property rights.

25. In the summer of 2010, President Lula and Prime Minister Erdogan of Turkey brokered a “deal” withPresident Ahmedinejad on nuclear enrichment which was then rejected by the E3 + 3. Brazil abstained onUNSCR 1973 on Libya. President Rousseff has changed Brazilian policy on human rights, as evidenced bythe Brazilian vote in favour of a Special Rapporteur on Human Rights for Iran in March 2011.

26. On disarmament and non-proliferation, Brazil is bound by its constitution and a Latin American NuclearFree Treaty (Treaty of Tlatelolco) not to develop a nuclear weapon. It had a fledgling secret nuclear weaponsprogramme under the military dictatorship. There is some support from nationalists and old-left ideologues forBrazil to become a nuclear power strengthened by unease over the perceived unfairness of the NPT (whichBrazil signed in 1998) but no likelihood of this view becoming Brazilian policy. Brazil is a member of theNew Agenda Coalition, generally constructive, and has influence with some (Egypt, Syria), who hold differentviews. In its current Defence Strategy it rules out signing the Additional Protocol without progress ondisarmament. 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 theUS. It is a transit point for cocaine trafficked to Europe and the US. It has forty major sea ports handlingcontainer 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 indisrupting cocaine routes. The UK has started a strategic dialogue with Brazil on drugs policy with a view toagreeing an MOU. Brazil has taken some steps to fill the void left by the US DEA following its expulsionfrom Bolivia, and the UK is encouraging it to do more.



28. Public security remains one of the major challenges facing Brazil today, with high levels of violent crimein many of the major cities. Efforts to address these problems have been given additional impetus by the 2014World Cup and 2016 Rio Summer Olympics. Over recent months, the impressive process of pacification ofRio’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 largeborders dominates military tasking, even though there are no credible threats to Brazilian territorial integrity.Brazil launched its first National Defence Strategy in December 2008. The Strategy outlines further areas forfocus including: reorganisation, strengthening the MOD; boosting the Brazilian arms industry; protectingnatural 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 bolsterBrazil's credibility as a prospective permanent UNSC member. Brazil is the 12th largest contributor ofpersonnel to UN peacekeeping and leads the UN mission (MINUSTAH) in Haiti with 2,200 peacekeepers. Ithas previously deployed with UN operations in Angola and East Timor and is considering deploying withsmaller missions in Africa and the Middle East. Only professional soldiers can serve outside Brazil. Brazil willstick to missions that have the full consent of host countries, because of their commitment to nationalsovereignty and non-interference. Brazil does not yet have the capability or structures in place to deploy civilianforces 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 armedforce (the joint requirement assessment process is some way off) followed by a political decision. In defenceprocurement, like so many other areas, Brazil’s wish is to master the technology it buys rather than buy themost up-to-date equipment off the shelf. Fears of foreigners withdrawing their support for defence equipmentafter 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 SouthGeorgia and the South Sandwich Islands. 28 December 2010, the British Ambassador was informed of thedecision to refuse entry to HMS CLYDE and HMS GLOUCESTER, which had applied for diplomatic clearanceto enter Rio de Janeiro. HMG has expressed its disappointment and is discussing with Brazil how to handlethese visits in the future.

Development

33. Brazil’s record of 15 years of macro-economic stabilisation followed by the universalisation of socialprotection programmes has lessons for many countries. It is on track to achieve almost all MDGs. Its “socialtechnology” includes a famously successful conditional cash transfer scheme “Bolsa Familia”, as well asAIDS treatment, vaccination and infant health schemes. Brazil has progressive policies and institutions (forexample 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 areexperiences valuable to others, including through Brazil’s existing ‘South-South’ dialogues and trilateralprojects such as with the UK in Kenya. Brazil, under the MINUSTAH mandate, continues to lead reconstructionand 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 anatural advantage as a development actor, though it is cautious about forcing Brazilian solutions on developingcountries. Brazilian aid resources are rising rapidly (currently comparable to Finland). But to play a greaterinternational development role Brazil needs to move beyond familiar instruments (technology transfer) andfamiliar partners (Lusophone Africa, regional neighbours). Additionally, Brazil needs to address institutionaland operational hurdles to respond to its growing demand for development cooperation. It has a statedcommitment 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 ofgrowth in Africa.

35. Brazil has become a partner of choice for infrastructure construction projects in Africa (particularlyLusophone). The Brazilian National Development Bank (BNDES) has played a vital role in facilitating andsubsidising Brazilian companies (providing from 2008–Q1 2010 £2 billion in commercial loans) to bid forinternational 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 economictrajectory presents significant opportunities for UK companies, especially in a burgeoning middle class. TheOlympics provide a particular point of contact, and are helping to open the door to increased numbers ofvisitors in both directions. The UK has a number of areas of expertise that are particularly valuable to Brazilas 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 astep change in the relationship.

19 April 2011



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 aimedspecifically at the most vulnerable population groups—has produced a major transformation in the country. Nodoubt, still a long road before the regional and social disparities that were built over centuries can bepermanently overcome. Yet, the core component of the country’s development policy—one which reconcilesproduction growth with a more equitable income distribution and opportunities—has proved effective inaddressing this challenge.

2. The Millennium Development Goals have emerged as important signposts of this policy. They provide amajor contribution to the assessment of public policies, federative partnerships, and social mobilization efforts.And, most importantly, they encompass an integrated vision of development based on social justice.

MDG 1: Eradicate Extreme Poverty and Hunger

3. In regard to extreme poverty, Brazil’s original goal was to reduce until 2015 the overall level to one-fourth of that registered in 1990. Current projections for extreme poverty reveal that the goal was alreadyachieved in 2007 and exceeded in 2008, when the poverty rate registered 4.8%, less than one-fifth the 1990level of 25.6%.

4. Brazil’s goal is to eradicate hunger by 2015. In 1996, 4.2% of Brazilian children between the ages of zeroand 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 andwell-fed children, would indicate that the risk of children consuming an insufficient quantity of calories andproteins 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 remainingchallenge 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 throughgovernment measures to expand the access to elementary education, including the establishment of the NationalElementary Education Development and Teaching Enhancement Fund (FUNDEB), through which financialresources are allocated to all educational levels and modalities, and the implementation of the EducationDevelopment 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. DilmaRousseff—was elected President for the first time in the country’s history. Notwithstanding this, gender equalityand women’s empowerment remain distant goals in the Brazilian political scenario: 9% of Parliament Membersare women.

8. The United Nations goal of eliminating gender inequality in education is not a crucial issue in Brazil, dueto 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 yearfor measuring progress on the MDG, through 2008, child mortality rates were reduced on average by 58% atthe national level.

10. Based on the target set out in this MDG, the child mortality rate should be reduced to 17.9 deaths per1,000 live births by 2015. Assuming current trends continue, Brazil will achieve this target before 2015. Thefact that Brazil is on track to achieve this target is supported by an assessment of the MDGs in 68 prioritycountries in 2008. This evaluation showed that Brazil displays the second largest reduction in infant/child



mortality among the nations examined, and that it is one of the 16 countries capable of achieving theproposed target.

MDG 5: Improve Maternal Health

11. MDG 5 aims to reduce maternal mortality by three-fourths from 1990 to 2015. In 1990, the adjustedMMR (Maternal Mortality Rate) was 140 deaths per 100,000 live births, while in 2007 the figure had fallen to75 deaths per 100,000 live births, a reduction of approximately 50%. To achieve MDG 5, Brazil must ensurean MMR equal to or less than 35 deaths per 100,000 live births by 2015.

MDG 6: Combat HIV/AIDS, Malaria, and Other Diseases

12. HIV/AIDS—Estimates indicate that there are 630,000 people living with HIV/AIDS in the country. Theprevalence rate of infection among the general population 15–49 years is 0.61%; 0.41% among women and0.82% among men and has remained stable since 2000.

13. The universal access to free antiretroviral therapy (ART) in the public health system established by theFederal Government in 1996 led to better and longer survival for HIV/AIDS patients as well as to a reductionin the number of hospitalizations, which decreased by 82% over the period 1997–2007.

14. TUBERCULOSIS—Since 2004 the incidence rate of tuberculosis has declined in Brazil. In 2008 therate was 37 cases per 100,000 inhabitants. Decentralization and expansion of control actions that have beenintegrated into Primary Care, associated with a set of actions undertaken by states and municipalities, areresponsible for the reduction in mortality rates.

15. MALARIA—The Amazon, which accounted for 99.8% of all cases in Brazil, is a region of immensegeographic extension and difficult access for health services. Malaria rates in the Amazon region have fallensince 2006, associated with the large expansion of the healthcare network. During the period of 2000–08, thenumber of hospitalizations has fallen from 20,830 to 3,647, representing a decrease of 82.5%; the mortalityrate from 1.10 deaths per 100,000 inhabitants to 0.23, representing a decrease of 75.8%, and the fatality ratefrom 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 todrinking water and basic sanitation, and improving the conditions of life of slum dwellers were established.

17. A full 61% of Brazilian territory is covered by forest (5.2 million km2), 2/3 of which is located in theAmazon biome. Deforestation in the region has been subject to ongoing monitoring by the Braziliangovernment. After reaching its peak levels in 1994–95 (29,000 km2), deforestation in the Legal BrazilianAmazon fell in 2009–10 (6,541 km2) to its lowest levels since official tracking efforts began. Recently, thecountry launched systematic deforestation tracking measures in biomes located outside the Amazon, beginningwith the Brazilian Savanna Biome (“Cerrado”), in the 2002–08 period.

18. Brazil’s energy mix is clean. A total of 45% of the country’s internal energy consumption derives fromrenewable sources, resulting in CO2 emission rates from fossil fuels of 1.88 tons per inhabitant, less than halfthe global average (4.38). Deforestation continues to represent the elementary source of Brazilian CO2

emissions, 76.3% of which stem from changes in land and forest use primarily in the Amazon and Savannaregions. In 2005, CO2 emissions reached 1.57 billion tons, 69% greater than the level registered in 1990. Thecountry reduced its CFC consumption from 10,000 tons ODP (Ozone Depletion Potential) in 1995 to 290 tonsODP in 2008 through fulfillment of the 2010 goal established under the Montreal Protocol for the completeelimination of CFC.

19. The establishment of Conservation Units (CUs) represents an underlying pillar of Brazil’s strategy toprotect biodiversity. From 2002 through 2009, total protected area increased by 69%. There were 923 CUs in2009, 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 populationin urban areas without access to drinking water by half, with approximately 91.6% of the population servedby piped water networks in 2008, an increase of nearly 10% in relation to 1992. Although basic sanitationservice has been significantly expanded, it lags far behind the delivery of drinking water, although 80.5% ofthe urban population currently has access to sewage systems or septic tanks, representing a 14% increaseagainst 1992. Disparities in the access to basic sanitation by different socioeconomic groups, between urbanand 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 urbandwellers with adequate housing conditions rose from 50.7% in 1992 to 65.7% in 2008. However, 54.5 millionurban residents continue to suffer from inadequate housing conditions. Similarly, the access to shelter remainshighly unequal between regions and socioeconomic groups.



MDG 8: Develop a Global Partnership for Development

22. In recent years, the Brazilian government has undertaken a broad reorganization process aimed at moreeffectively adapting its cooperation initiatives to the country’s foreign policy priorities and expandingexternal responsibilities.

23. In general terms, Brazil is active on two fronts. First, it has effectively and purposefully collaborated tobuild an international agenda for development and expanded its participation in international organizations andprograms through proposals and negotiations aimed at effecting changes in the current rules of globalgovernance. It has actively contributed in international forums and through coordinated efforts with othercountries to build a less asymmetrical world order. Second, the country has expanded its participation in amultiplicity of cooperation actions with developing countries, in particular Central American and AfricanStates.

24. Several Brazilian government measures aimed at fulfilling MDG 8 could be mentioned. Sustainedeconomic growth, reduced external vulnerability, political stability, and enhanced social policies have allowedthe country to chart a more pro-active course in the international arena based on the exchange of successfuldevelopment 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 MemberStates 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 Nationscontinue to be relevant.

28. There is an almost unanimous view among Member States that the Security Council must be enlargedin 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 orderto award legitimacy and efficacy to the Security Council.

30. The ongoing discussions on the UN Security Council reform are gaining new dynamism following thesubmission of the draft text-based negotiation by the facilitator.

31. The negotiation text that the facilitator submitted has demonstrated that an enlargement with twocategories 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 140countries given in favour of the text-based negotiation in order to make a resolution proposal feasible and toensure that it is approved.

33. Since 2005, the United Kingdom has explicitly supported Brazil as a permanent member of anenlarged 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. Thebalance has shifted: Brazil currently holds 28.3%. Europe, not including Russia, once held over 7% of theworld’s forests. Currently, there are only 0.1% of the primeval forests in Europe.2

35. Brazil is one of the countries that has destroyed its forests the least. Of its original coverage, Brazilretained almost 70%. In Europe, that figure is 0.3%. The greatest paradox is that, instead of being recognizedfor its conservation history and its present efforts for protecting and maintaining its original forest cover, Brazilis actually severely criticized by some of the deforestation champions, who deprived themselves from theirown forests a long time ago.

36. The Government of Brazil is committed to sustainable development in the social, economic andenvironmental aspects.

37. Over the past few years, Brazil refuted the common sense notion that economic development is alwaysaccompanied by increased greenhouse gas emissions. In 2010, the Brazilian GDP grew over 7.5%. In the lastdecade, extreme poverty in Brazil has been reduced by 70%. In the same period, deforestation indices dropped1 15 July 2010.2 Source: EMBRAPA Satellite Monitoring Centre, “The World’s Forest Evolution Research”—Embrapa—is the acronym for

“Empresa Brasileira de Pesquisa Agropecuária”—the Brazilian Agricultural Research Corporation (http://www.embrapa.br/english).



by over 75% and have never been as low. The reduction in emissions caused by deforestation over the past fiveyears means that Brazil has made very significant contribution to the mitigation of greenhouse gas emissions tothe 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 ClimateChange 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 NationsConference on Environment and Development (Rio–92) and as an opportunity for debating new challengesand 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, accordingto data from HM Revenue & Customs.

41. UK imports from Brazil totalled £3.7 billion (22% up on 2009). Significant among them were gold (insemi-manufactured forms, for non-monetary use), aircraft (33.1% up on 2009), iron ore (80.3%), crudepetroleum 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 medicinalproducts), 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 afaster-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 asIreland (4%), Spain (8.6%), France (8.7%), Italy, Germany and Belgium (all 13.7%) and the Netherlands (20%).

44. In 2010 Brazil was the 24th most important country for UK imports and the 27th for UK exports,compared to 32nd and 33rd respectively in 2005.

45. The following Brazilian companies have recently invested in the UK: Ambev (whose merger withBelgium’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 TupyFundições Ltda (foundry), WEG (electric motors), Stefanini (IT), Banco do Brasil (banking), H. Stern(jewellery), Santista Têxtil (textiles), Boticário (cosmetics), Odebrecht (construction) and Petrobras (oil andgas).

47. British companies in Brazil, in terms of investment, include Shell, Arcelor Mittal Brasil, GSK, SouzaCruz, 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, whichannounced its intention to invest US$ 20 billion over the next few years, and Wellstream, which committedUS$ 60 million to manufacturing pipes for offshore oil production. As for future investments, one of the majorinitiatives is by Ferrous Resources, which by 2016 will invest around US$ 4.6 billion in the construction of anew 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 metalore mining (US$ 64.5 million) also received significant amounts. According to Brazil’s Central Bank, UKdirect investments into Brazil increased from US$ 153 million in 2005 to US$ 1 billion in 2010.

50. The Joint Economic and Trade Committee (JETCO), established during President Lula’s state visit tothe UK in March 2006, has proven to be an important bilateral mechanism to promote UK-Brazil trade andinvestments. JETCO’s 5th meeting took place in São Paulo in August 2010, when the two sides agreed thatfuture discussions would focus on six major topics: Infrastructure & Energy, Sports Co-operation (includingthe 2014 World Cup and 2016 Olympics), Innovation & Competitiveness, Creative Industries, Training andCapacity-Building, and Healthcare. Working groups composed of government and private sector representativeshave 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 fostergreater 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 benefitsof 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 by87% in relation to 2009, reaching a record high of US$ 48.5 billion.



53. Energy and infrastructure are attracting major foreign investment. Brazil has made great strides inincreasing its total energy production, particularly ethanol and oil. Increasing oil production has been a long-term goal of the Brazilian government and the recent discoveries of huge “pre-salt” offshore deposits couldtransform Brazil into one of the biggest producers in the world. There are opportunities for foreign investorsin exploration and in the supply of services and equipment. Due to national content policy, the best way forforeign companies to participate is to open a subsidiary in Brazil and/or to enter into a joint venture with localcompanies. The opening of a Petrobras office in London has helped to identify British companies that couldpotentially take part in the Brazilian oil and gas supply chain, and also to establish partnerships betweenPetrobras and research institutions.

54. Under the Growth Acceleration Programme (PAC) there are many projects which represent excellentopportunities for foreign investors and suppliers of goods, services and technologies. The second phase of theprogramme, launched in March 2010, aims to invest up to US$ 571 billion between 2011–14 and a furtherUS$ 376 billion after 2014. The programme is focused on logistics, energy, urban infrastructure, housing,health, and public safety.

55. According to the Brazilian Development Bank (BNDES), total investment in Brazil’s industrial sector inthe period 2010–13 will be US$ 335 billion. Oil and gas will lead the way with US$ 211 billion, followed bythe mining (US$ 32.2 billion), steel (US$ 31.6 billion), petrochemical (US$ 21 billion), automobile (US$ 20billion), electrical and electronics (US$ 13 billion), and paper and pulp (US$ 12 billion) sectors, all of whichwill present huge investment opportunities for foreign companies.

Energy

56. Renewable sources—of which hydropower is the most important—represent more than 76% of Brazil’selectricity generation mix. Taking into account electricity imports, which also come mainly from renewablesources, 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 generationcapacity reached 106 GW by the end of that year.

58. In 2009, renewable energy represented 47.3% of Brazil’s domestic energy supply (including electricitygeneration and transport) while the global average was around 12%.

59. In addition to hydroelectric power and sugarcane ethanol, Brazil is increasingly exploring other cleanenergy 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 theaverage person in the UK, and even taking into account the significant energy efficiency gains Brazil will bemaking as a result of technological advances, demand for electric power in Brazil is predicted to grow by morethan 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’spopulation, 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 powergeneration by at least another 100 GW. According to the Brazilian Ministry of Mines and Energy, around 3/4of that extra power should come from hydroelectric plants, thus increasing the already very high proportion ofenergy from renewable sources in our overall energy mix and helping Brazil achieve its stated goal of reducingtotal carbon emissions by between 36% and 39% by 2020.

63. Over the coming years, the increase in the demand for energy will result not only from the country’seconomic growth, but also from the reduction in social and regional disparities. It will thus be at the same timea 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 isexpected 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 interms of MW per flooded square kilometre (around 20 MW/ km2) will be higher not only than that of Brazil’sother big dams but also far higher than that of Europe’s largest hydroelectric power plant, Alqueva in Portugal(a mere 0.95 MW/ km2).

65. As an indication of how seriously the Brazilian government takes the issue of environmental impact, anestimated 16% of the entire cost of the dam will be spent on mitigation measures. These measures, stipulatedin the environmental license for the dam that was granted by the Brazilian Institute of Environment andRenewable Natural Resources (IBAMA), include both conventional initiatives, such as the management of thethreatened fauna and the creation and maintenance of ecological reserves in the region, and less conventionalones such as the decision to transport the thousands of construction workers to the site for their shifts and thentake them back to their homes immediately afterwards, so as to limit the creation of new settlements in theregion around the dam.



66. As for the impact on the indigenous population in the region, none of the ten indigenous territories inthe region will be flooded and there will be no need to relocate any indigenous community living on landrecognised by the Brazilian state as their traditional home. Also, one of the conditions for the granting of thelicence for the dam’s construction was that the rate of flow of the Xingu river—important in many ways forthe 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 drugtrafficking. Colombian trafficking groups continue to dominate the worldwide trade in cocaine, but pressuresplaced on these groups in Colombia have resulted in the relocation of some trafficking operations to otherSouth American countries. Work with Brazil, targeting the cocaine trade, is an important part of SOCA’s overallend to end approach to target drug trafficking impacting on the UK through dislocating and disrupting the tradeat source.

2. SOCA’s upstream work against cocaine has contributed to a positive impact on the availability, price andpurity of the drug in the UK. Wholesale prices for cocaine are now at an all time high, with a kilogramreaching prices of over £50,000. The average purity at dealer level has also fallen sharply from 62% in 1999to 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 Brazilbecoming a major transit route for cocaine exported from South America to Europe. In addition Brazil haswell-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’sexports to key nexus points in Europe and West Africa are likely also to constitute an indirect contribution toUK supply. Direct trafficking of cocaine to the UK will usually be “little-and-often” by couriers on directflights from Brazil to the UK.

5. SOCA works closely with the Brazilian Federal Police operationally on organised crime, including drugtrafficking. Regular capacity-building exercises focusing on container profiling and port searches are conductedwith the Federal Police and Brazilian Customs. This is producing results. In June 2010 a Brazilian customsteam in Santos identified a suspect container that was subsequently discovered to contain 1.7 tonnes of cocaineconcealed in apples. SOCA has also facilitated ship rummage courses to joint teams of Federal Police andCustoms 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 seizedin the FY 2010–11). Further SOCA operational work regarding this transit route continues alongside Brazilianand Balkan law enforcement.

7. There will be benefits for the UK if Brazil takes a lead in the region on counter narcotic efforts and thereare encouraging recent signs that they are starting to do so, particularly in Bolivia where bilateral assistanceis planned.

8. Brazil has a large and increasing domestic cocaine market (second in size only to the USA) which islikely to be a particular focus for the Federal Police going forward. SOCA is encouraging Brazilian partnersto continue to focus on tackling cocaine trafficking via its eastern seaboard and airports, given the beneficialimpact 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 OrganisedCrime Agency (SOCA) in respect of the above inquiry. During the session the Committee asked how manySOCA employees were based in Latin America and I undertook to write to you to provide that figure. I canconfirm that the total number of SOCA employees posted to that region is sixteen.

Mark BishopHead of Strategy, Co-ordination and DevelopmentInternational Department

11 May 2011



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 onBiological 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 andinternationally. Brazil scored highest in the recent Climate Change Performance Index 2011 published byGermanwatch and CAN (Climate Action Network) Europe. Brazil is active and often leads in the G77. TheUK has also taken a prominent role on climate change both within the EU and individually. The UK hasalready shown by example, with the Climate Change Act, that nation states can set standards. The UK is alsoactive diplomatically and is supporting low carbon development plans in a number of countries, including workin Brazil. Brazil however considers that the EU as a whole has lost its leadership with no progress as yet onthe 20% emissions reduction target for 2020, although there is recognition that the UK is one of the memberstates pushing for a more ambitious target.

2. Experience to date and future opportunities for the UK to assist Brazil through helping to fund initiativesof global significance, such as Caroline Spelman’s recent announcement on funding for biodiversity dialoguesin 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 tosupport Brazil on environment issues. For example, while Brazil has come forward with voluntary actions forreducing emissions, UK funds would be welcome to support and strengthen these efforts, on REDD+ and widermitigation plans. WWF UK and WWF Brazil are working to support the development and implementation ofBrazil’s low carbon development plans at the national level and at the state level—for example, in the state ofAcre on one such example relating to REDD+ and a forest-based economy which is funded partly from DFIDand partly from the private sector.

3. The impact of trade with the UK and Europe on Brazil’s environment, with particular examples of thetrade 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 rainforestis crucial in maintaining natural services on which we all depend. Therefore responsible sourcing ofcommodities from these important habitats, such as soy, timber and bioethanol, is important for both producerand consumer. This requires action both by the private sector and the governments involved. For instance theUK Government, through DFID and DEFRA, along with private sector companies and organisations such asWWF are working to support the Roundtable on Responsible Soy and a new Roundtable on ResponsibleBiofuels.

26 April 2011

Written evidence from Michael Evans

Executive Summary

1. Green-Tide Turbines Ltd are developing unique Patented technology for a water turbine designed toextract energy from run-of-river and tidal stream. The UK funding environment has been challenging and hasrecently been made worse by the recent cuts to the Carbon Trust’s budget resulting in the withdrawal of thepotential of a £400 thousand grant to support our next development phase with QinetiQ. Brazil is a majormarket for us for both run-of-river and tidal stream, through UKTI we have met with a number of Brazilianenergy 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 UKGovernment extend their current insurance policy covering UK foreign liabilities and assets to cover IPprotection for UK SMEs.

Introduction

3. Michael Evans is a serial entrepreneur and inventor, Michael was co-inventor of the Compact MixedReactant fuel cell and co-founder of CMR Fuel Cells plc. CMR started up with assistance from CarbonTrust and secured two rounds of VC funding before floatation on AIM at a valuation of £50 million inDecember 2005.

4. Under the founder’s management, CMR were elected “Innovators of the year 2005” by the Carbon Trustand Daily Telegraph, “One of the top 25 companies to change the World by 2010” by RedHerring and HarvardBusiness School and “Technology Pioneers 2006” by the World Economic Forum.



5. Michael left CMR in March 2008 and started developing his water turbine concept, forming Green-TideTurbines Ltd in March 2009. Michael has a Master of Arts in Industrial Design and a BSc(hons) in ProductionEngineering and 20 years project management experience.

6. Green-Tide Turbines Ltd are exploiting opportunities in Brazil for their technology and are in discussionswith the UK Intellectual Property Office about adaptation of the Lambert Collaboration Toolbox, developedfor collaboration between UK businesses and academia, to work for collaborations of a similar nature betweenthe UK and Brazil.

Information

7. Lack of funding in Europe has resulted in Green-Tide Turbines Ltd’s strategy shifting to Brazil and weare considering how a UK company can take advantage of opportunities in Brazil whilst remaining essentiallya UK based company contributing to the UK economy. This motivation is aligned with UK Governmentstrategy of developing a knowledge based economy and highlights the importance of Intellectual Propertyprotection 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 currentlypurely focused on research and development. The only thing we have of value is our Intellectual Property andthis is used to secure the funding we need to conduct R&D through sale of equity in our business to BusinessAngels and/or Venture Capitalists. Our investors are therefore extremely sensitive to risks to our IP. Going intoBrazil represents a significant risk to our IP especially as we will be working with Brazilian Universities andlarge 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 riskwill lower the barrier and encourage SMEs to export their technology in new foreign markets and improve theUK’s balance of trade. My suggestion is for the UK Government to extend their current insurance policycovering our foreign liabilities and assets to cover IP protection for UK SMEs. We can therefore trade withthe confidence that we have UK Government resources behind us. Also, any company considering infringingour 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 strategiesin foreign markets.

— Our negotiating position and therefore confidence in dealings with foreign partners is strengthenedensuring 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 legalpresidents and treatise further tightening UK and Brazilian commercial ties.

— Backing of this sort would give UK businesses strategic advantages over other countries competingfor 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 inFCO 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 universitydepartments developing techniques and technologies relevant to agriculture in Brazil and especiallyin relation to the impacts of climate change and yet no priority is afforded food security—an areain which the UK has significant global potential.

— A recommendation is given for a more strategic focus on national benefits to be derived fromtechnology transfer and pro-active support for those UK companies and HEIs with relevanttechnologies that can be transferred and lead to UK-Brazilian business joint ventures.



— Greater financial support and priority should be provided through UKTI for agricultural and foodscience and related technology transfer between the UK and Brazil.

— A recommendation for the establishment of a Brazil Britain Business Council in the same way asa 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 priorityin the BRIC nations all of which have agriculture as a key component of national growth—primaryamong which should be Brazil. The focus should be on co-ordinating international effort and insupporting the development of joint ventures with UK science based agriculture and foodcompanies or licensing agreements.

Biography: Dr David Dent & Dent Associates Ltd

Dent Associates Ltd provides advice and support to science based organisations and industry involved infood security, quality and safety and the impacts of climate change in relation to export and internationalpartnering, 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 intergovernmentalconferences and programme development with UN and National Development Agencies including the WorldBank, Inter-American Development Bank, DfID and USAID.

Over the last seven years David has been building high level business relationships between Brazil and theUK including technology transfer, facilitating establishment of joint ventures and participating in visits by UKGovernment 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 facilitationduring the visit by Sir David King in 2007 that led to the establishment of the Brazilian EMBRAPA LABEXProgramme in the UK. David is a frequent visitor to Brazil, as a representative of UKTI but also for his owncompany Dent Associates Ltd, which employs a Brazil specialist who has an office in Brasília. Significantexpansion 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 technologiesin support of sustainable agriculture, bridging the divide between academia and business with the successfulcreation and secured investment for two science-based companies, Conidia Bioscience and I2L, as well as anew publishing company ADG Publishing Ltd. David is a Vice President of the Parliamentary and ScientificCommittee, a publicly elected Governor of the Surrey and Borders National Health Service Foundation Trustand Founder of the Pennies Foundation and inventor of the scheme which generates funds for charities throughthe 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 inagricultural 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 animalfeed, veterinary health and welfare, animal breeding and food safety, forestry and rural land management (TheUK Agri-Food Science Directory 2008–09—IATC/UKCDS p 119—compiled by Dent Associates).

1.2 The agricultural science base in the UK is involved in the development of a number of technologies andinnovations in the field of food security and waste management; Dent Associates Ltd are currently compilinga 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 technologiesand innovations are applicable to Brazilian agriculture and food processing industries. In order to maximisethe value of these technologies to UK plc and to enable their application to one of the world’s leadingagricultural producers, a more co-ordinated strategic approach is needed and resources prioritised fortechnology 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 FCOScience and Innovation Network, the EMBRAPA LABEX Programme and the FAPESP/BBSRC collaborativefunding agreement, too little resources are allocated for the specific promotion of UK-Brazil technology transferwithin agriculture, food processing and waste management.

1.4 Given the priority afforded agriculture in Brazil to their economy, the reputation and extensive capabilityof the UK agriscience and food science base, the technologies that are available in the UK which are relevantto Brazil, too little resources and priority is given to promoting UK-Brazil collaboration in this area.



2. UK Government Priorities

2.1 Export in support of growth in the UK economy is a government priority. Food security is a governmentpriority 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 innovativefarming practises—all of these Government priorities are addressed in the export of UK agriscience and foodtechnologies to Brazil.

3. Food Security

3.1 Tackling food security is essential to our security and prosperity as a nation. Food security is a globalproblem and therefore requires a global solution. The FCO should be working with a global network of postsin the same way as it does with climate change to promote international action on food security. The issuesare related, and will impact massively on the ability of our nation to sustain its food supplies, not least throughbuilding 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 investmentin agriculture in the last 30–40 years” and this is certainly true with regard to that allocated to UKTI in thisfield in the last 5–6 years, relative to others. Food security has to move up the political agenda and not leastbe 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]; by2020 Brazil could easily be the world’s leading exporter in each of those fourteen items, according to theOECD-FAO’s forecast of 40% overall growth in Brazilian agriculture. That astounding capability surmountsall other nations. Brazil is presently using only 12% of its potential arable soil, and it still has more virginterritory than anywhere else on earth. The US Department of Agriculture estimates that there remains anadditional 420 million acres that could be developed for farming. That’s an area bigger than the sum of France+ Belgium + Nigeria, or Alaska + Indiana.

3.4. The nation that the UK needs to be building relationships with regard to food security is Brazil and wehave some of the most exciting and innovative agricultural technologies and companies who with the rightsupport could help galvanise agricultural production which if partnered in the right way could generatesignificant 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 supportfor those UK companies and HEIs with relevant technologies that can be transferred and lead to UK-Brazilianbusiness joint ventures.

4.2 Greater financial support and priority should be provided through UKTI for agricultural and food scienceand 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 BusinessCouncil (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 theBRIC nations all of which have agriculture as a key component of national growth—primary among whichshould be Brazil. The focus should be on co-ordinating international effort and in supporting the developmentof 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 comparativeinternational environmental Law, has been actively engaged with the negotiations leading up to COP15 andCOP16 and in the legal assessment of climate change, oil and gas/bioenergy expansion in Brazil as well as thecurrent discussions about agro-ecologic zoning for biofuel production in Brazil.



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 thepresent without compromising the ability of future generations to meet their own needs”. Energy plays a crucialrole 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, andpolitical activities; the environment and climate are influenced by it, and often it determines whether nationslive in peace or conflict. Accordingly, “the use of energy is only sustainable when the sufficient and permanentavailability 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 thanthe planet’s population. Whereas the world population has quadrupled since 1870, to six billion at present, theworld-wide energy consumption and therefore the consumption of fossil resources in the form of coal, oil andnatural gas, has increased 60-fold. The average person today consumes 15 times more energy than a person130 years ago; those living in industrialised countries consume even more. The current explosion in energyconsumption started about 1950; and doubled between 1970 and 2000. Moreover, no fundamental change ofthis 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-commercialuse of firewood constitutes 9% of the world-wide consumption of primary energy. Other types of renewableenergy, primarily hydropower, add up to a share of 4.5%. Nuclear power meets 6.7% of the demand. Thussome 80% of the world’s energy supply is based on finite fossil energy carriers: in commercial applicationsthe figure is as high as 88%. The data demonstrate that energy supply world-wide is based primarily on thefinite 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: climatecompatibility, sparing use of resources, low risks, social equity and public access. It should also give a freshboost to innovation and help create jobs with a future. Numerous worldwide and regional studies indicate thatrenewable 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, interms of both time and location. Equal opportunities in accessing energy resources and energy services mustbe assured for all. The energy supply must be adequately diversified so as to be able to react to crises and tohave sufficient margins for the future and room to expand as required. Efficient and flexible supply systemsharmonising efficiently with existing population structures must be created and maintained for the generationsto follow. The adaptability for the regeneration of natural systems (resilience) may not be exceeded by energy-related emissions and waste. Risks for human health concerning the generation and use of energy should beminimised and limited in space and time. Developing energy systems with international co-operation shouldreduce or eliminate potential conflicts between states due to a shortage of resources and also promote thepeaceful 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 ratherrequires in parallel a significant increase in energy productivity and a real change in production andconsumption patterns. Doubling energy consumption by the year 2050 would result in enormous pressure onnon-renewable energy resources despite the high proportion of renewable energy. Climate change targets cannotbe 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 developmentsare 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 reducedependence on Middle Eastern oil. Despite the ups and downs in the development of this process, it seems tobe successful, as more than 80% of new cars now being sold in Brazil, called “FLEX Cars” are manufacturedto 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 countriesto seek alternative energy sources. Brazil’s example in the ethanol market is an illustration of how the countrydeveloped 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.



2. Oil and Gas Scenario

SP

PR

SC

RJ

ESMG

GO

DF

10. The Brazilian government of President Getúlio Vargas created Petrobras in 1953 to undertake a pathtoward oil self-sufficiency. Petrobras worked to guarantee retail supplies of transportation fuels and lubricantsto 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 crisisof the 1970s influenced most Brazilian policymakers to consider that their country’s dependence on oil importsjeopardized national development and security. For this reason, Petrobras doubled up on efforts to search forhydrocarbon 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 transportsector 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 discovereduntil the pre-salt reserves.

13. Petrobras’ discoveries in the Campos basin meant Brazil could implement energetic policies andprograms developed to set a more consistent public-private base for petrochemical and ethanol production totackle 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 PROALCOOLprogramme to provide tax incentives, credits, and infrastructure to sugarcane and ethanol producers. Between1975 and 1985 domestic ethanol production quadrupled. Such concerted efforts to find hydrocarbons, produceethanol, and displace imports in the 1970s were not merely the case of adjusting the national economy to theinternational prices; it was also an effort to turn the development and security strategy sustainable within anincreasingly instable international environment where energy was essential.

15. So crucial was the country’s strategy of development and industrialization considered for national securitythat it justified a thorough political, financial, institutional, and technological mobilization.3

16. If the oil crisis of the 1970s reinforced Brazil’s defensive imperative to decrease energy imports, then itwas the partial privatization of Petrobras in 1997 that replaced the state controlled import substitution strategywith a more balanced, entrepreneurial approach that stimulated private and foreign investment, technologytransfer, and production efficiencies.

17. The campaign to liberalize Brazilian production, through the partial privatization of Petrobras and theconcurrent formation of a concessionary policy framework for hydrocarbon exploration and production createdthe 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.



18. Under the 1997 Oil regulation, Brazil’s proven reserves of oil and gas grew by 40%, investment rosefrom $4 to $25 billion per year, production doubled in the following decade, and the petroleum sector’simportance to overall Gross Domestic Product (GDP) expanded from 2% to 10%. Two decades ago Brazilpurchased over 40% of its energy from abroad; in 1999 that had reduced to 24.1% of its total energyconsumption, including 34.5% of its petroleum use.

19. By 2008 the nation had reduced its external energy dependence to 8.3%, achieved self-sufficiency incrude oil production, and was the world’s largest exporter of ethanol. Between 2005 and 2009, oil productionrose from just over two million barrels per day to nearly 2.6 million, and ethanol production grew from nearly4.2 million gallons to over seven million gallons. With transportation fuel security at hand, the Braziliangovernment challenge is to develop a policy framework that can provide energy efficiency by doubling theproduction of oil and gas at the same time that keeps the country in an advantageous position in the globalpolitical economy.

20. Brazil found its path in energy security by discovering the “pre-salt” oil reserves in 2006. The expression'pre-salt' refers to an aggregation of rocks offshore in a large portion of the Brazilian coast and with potentialto 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 replacingthe use of imported oil.

21. By the end of President Lula da Silva’s first term (2003–06) it was evident Brazil had significantlyachieved transportation fuel security by boosting oil and ethanol production as a base for a new flex-fuelpassenger vehicle agenda.

22. Petrobras found its new oil and gas reserves in cooperation with a consortium of oil and gas companiesto 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 January2011. Brazil’s oil production reached 2.122 million barrels per day (bpd), rising 6.3% in comparison to January2010. However, oil production dropped around 2.65% over December 2010, but was higher than November’soil production of 2.089 million bpd. Gas production reached 66 million cubic meters per day, 13.2% higherthan January 2010, and 4.3% lower than December 2010.

24. Brazil’s oil and gas production reached 2.539 million barrels of oil equivalent per day. There was asignificant reduction in oil production in January 2011 in the Caratinga, Polvo and Urugua oil fields incomparison to December 2010 because oil production was put on hold at Platforms P-48, FPSO Polvo andFPSO Cidade de Santos.

3. Policy and production

25. In 2009 President Lula introduced four integrated legislative provisions to maximise state control overthe 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 ProductionSharing Agreements (PSAs) and commercialize the state’s portion of the profit oil earned from eachPSA; 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 1997for 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 andgas exploration and production, but the roles of both Petrobras’ and Petrosal should provide the Brazilian statewith strong control over the nation’s hydrocarbon resources.

27. Under the proposed policy framework, the National Council for Energy Policy (CNPE) would continueto design national energy policy, but the ANP would be authorized to identify strategic blocs from the pre-saltreservoirs 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 withoutmaking any investment. Therefore, the government will exercise control over exploration and production ofthe pre-salt reserves through its majority 51% ownership of voting shares in Petrobras and sole ownershipof Petrosal.

29. The government’s regulatory adjustments to place Petrobras at the centre-stage of national efforts toexploit the pre-salt reserves comes after the company’s widely recognised success in developing competitiveadvantages 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 reservesto consortia with at least 30% Petrobras participation or opt to directly award an exclusive PSA to the state



controlled firm. Thus, the ANP determines under which conditions participating private sector or foreign stateowned enterprises (SOEs) will be allowed to invest and apply their technological and managerial capacities inpartnership with Petrobras.

31. On 30 June 2010 President Lula signed one of the key pre-salt proposals into law which allows for thetransfer of rights to five billion from the pre-salt fields to Petrobras in return for the recently negotiated $42.5billion worth of company shares.

32. This completed deal now sets up Petrobras’ impending public stock issue which could raise some $75billion depending on how investors gauge the company’s falling stock price and the politics surrounding thepre-salt production.

33. Politics have certainly challenged Petrobras and slowed complete passage of the new regulatoryframework as the producing states of Espirito Santo, Rio de Janeiro, and São Paulo duel with the non-producingstates 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 ofroyalties from the pre-salt. The measure, passed by Congress earlier this month, withdrew from themunicipalities and states that produce part of the compensation received by oil extraction. The president willsend a new bill to Congress by reinstating the model of distribution of royalties from oil, keeping the agreementreached earlier with the governors and mayors.

35. The victory of President Lula’s successor, Dilma Rousseff of the Workers Party, in October’s presidentialelection encouraged full congressional passage of the PSA regime and a rebound of Petrobras’ share price inearly 2011. These probable outcomes will provide Brazil with state control over the nation’s hydrocarbonresources and one of the largest oil and gas companies of the world, providing future governments the revenuesand 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 regionalenergy security in South America and to become a stable supplier of crude oil and transportation fuels aroundthe 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 comeonto 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 theMiddle East, home to the world’s largest oil reserves. On one hand, high oil prices, which are almost hittingUS$120 per barrel, tend to make pre-salt projects more profitable. On the other hand, the Brazilian politicalstability 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 fromup to 7 km below sea level is very expensive. Petrobras has confirmed that pre-salt extraction costs are aroundUS$25 per barrel, but other oil companies said costs are roughly US$ 45 per barrel. Brazil’s pre-salt findingsadd up to 36 billion barrels of oil equivalent (boe) (including oil and gas), according to Petrobras and theBrazilian National Petroleum Agency (ANP). Brazil will climb to 9th place in the world’s oil reserves rankingwith an estimated 51 billion barrels (including existing reserves).

39. The main challenge of pre-salt shows that investment scenario billionaires and huge risks arising frompressure and temperature conditions never before experienced, corrosion of equipment, can pose a truetechnological and scientific challenge and a high hazard to workers or even tragedies like the leak in the Gulfof Mexico. Finding oil in entirely new conditions, overcoming the thick layer of salt, requires the developmentof new technologies for extraction.

40. As to the logistics, Petrobras signed a shareholders’ agreement to create a company called LogumLogística S.A., which will set up an extensive multimodal logistics system for the transportation and storageof ethanol. Logum Logística S.A. is a close corporation comprised of ordinary, registered and no-par-valueshares 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 LogisticsSystem, going across 45 cities, linking the main ethanol-producing regions in the states of São Paulo, MinasGerais, Goiás and Mato Grosso to the Paulínia Refinery (Replan) in São Paulo. The project will have a transportcapacity of up to 21 million cubic meters of ethanol per year.

18 April 2011



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 thanother 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 professionalservices sector.

— HMG needs to have regular high level Ministerial contact and avoid further postponements ofsenior visits.

— HMG support also needed on obstacles to trade.

TheCityUK

1. TheCityUK is a membership body representing UK financial and related professional services. Its Boardand Advisory Council include the most senior individuals from across the sector. It has a global export focuswith a commitment to help UK based firms grow their business in other parts of the world. It has inherited therole of International Financial Services London (IFSL) and its predecessors, but has expanded its remit torepresent 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 bestpractice 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 tosubmit 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 currenteconomic difficulties if UK business does more to develop trading links with emerging markets, amongst whichBrazil 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 withNew York, and the US Business Schools, but they are also well travelled and often have longstanding culturallinks with Europe. They have not failed to notice the transformation of London since the 1980s, and most, ifnot all, Brazilian international business figures know of the facilities and markets available in the UK forfinancial, legal and related professional services etc. But with China as Brazil’s major trading partner andBrazilian business aware of the global interest in its resources, competition is fierce. UK links overall are stilltoo weak. Delegations from Europe, North America, and increasingly Asia/Middle East lose no opportunity toremind Brazil that they are also keen to develop business with Brazil. UK business organisations, both withand without the support of HMG, should be seeking to build on this awareness of UK expertise and competeactively in the expanding Brazilian market.

4. Brazil has been a regular destination for visiting Lord Mayors over the years, but the intensity has pickedup since 2006. There have been three visits, all accompanied by business delegations, in the last four years,with the next one scheduled for June 2011. These visits have been very effective in maintaining contacts andestablishing awareness across the Brazilian political, financial and business community of the services the UKhas 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 thelevel of bilateral trade and investment between Brazil and the UK, and that practitioners in that field have alot to contribute in facilitating such an increase. Regular visits have enabled the full agenda of subsectorsrepresented by TheCityUK to be included and practitioners have found the access afforded by such visits tobe invaluable in building up business relationships with Brazil. Brazil is a sophisticated market, where buildingrelationships is important but takes time. For this reason, practitioners realise that to do successful businesswith 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 withstatistics outlining the economic success of Brazil, its growth, its status as Investment Grade since 2008, itsgrowing middle class, and its ability to withstand the international crisis of 2008 largely thanks to the strengthsof its domestic market. The Committee will also know of the depth of Brazil’s natural resources, not least inenergy, 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 ininward and outward investment, plus its significant needs on infrastructure, as offering significant opportunitiesfor developing trade and investment growth between the UK and Brazil.



6. There are good links between TheCityUK (and its practitioners) and the UKTI teams in Brazil andLondon. There are regular visits, exchanges of views, and two-way contacts to see how best UKTI can supportUK companies in this sector. The Brazil-based sector team visits regularly for training and meetings, which isimportant to keep up with developments and staff turnover. The Posts in Brazil understand the importance ofthe financial and related services sector as a facilitator of business across other sectors. We acknowledge thesignificant expansion in UKTI activities both in market and in the UK in recent years to advise UK companiesof 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 animportant annual umbrella meeting to maintain contact at Ministerial level. The subject of financial serviceshas been on the agenda each year, and should remain there given recognition on both sides for the role thesector plays. Good work has been done in technical areas which are important for the development of bilateraltrade and investment, such as intellectual property rights and accreditation standards. We also welcome theestablishment of a CEO Forum, and hope that this grouping does actually begin work in 2011 and that it willgalvanise the private sector in both countries to raise awareness of the opportunities for further bilateral tradeand investment. Many practitioners while hoping that such meetings will generate business opportunitiesrecognise that the very holding of the meetings produces an atmosphere and environment where bilateralbusiness 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 currentlyrestrictions whereby they are only allowed to practice international law, and are excluded from domestic legalservices. This subject is currently under the spotlight in the Brazilian press and subject to investigation by theBrazilian Bar Association. TheCityUK would welcome further liberalisation of the Brazilian legal servicesmarket while recognising that this will take time given the strengths of the domestic lobby. However, HMGshould 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-basedreinsurers. New regulations introduced in December 2010 were subsequently amended and it is not clearwhether further changes are in prospect, and how far the regulators in Brazil will permit foreign reinsurers toexpand their business. TheCityUK welcomes the liberalisation of the Brazilian reinsurance market, and urgesHMG 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 WorldCup in 2014, and the Olympic Games in Rio de Janeiro in 2016, plus a number of preparatory events in theother years. These events have highlighted the need for significant improvements in infrastructure where Brazilhas suffered from underinvestment for many years. Authorities at the Federal, State and Municipal level havelooked at the possibility of using PPP schemes for much needed infrastructure projects. Although the legalframework is in place, the actual number of projects has been small, and there remains significant politicalopposition in many areas to using PPPs. Despite this, several authorities have contacted UK institutions andpractitioners to register interest in PPP, and UK expertise is highly respected. But it is a slow process to convertinterest into actual projects. TheCityUK encourages the Government to continue to support this method as ameans 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. Thistrend offers significant opportunities for UK-based professional services practitioners to offer advice on accessto markets, finance etc. The UK should be promoted as a centre for advice to companies undertaking the rangeof cross-border trade and investment. The number of Brazilian companies registering to list on the markets inLondon remains disappointingly low, despite many efforts to explain the attraction of those markets. But thelarge number of Brazilian businesses and the attraction of overseas listings by Brazilian companies whichincreasingly seek foreign capital should mean that opportunities for London listings will remain. Brazil’sincreasing trade and investment with Asia, especially China, the Middle East, and with Africa, offersopportunities for UK companies with expertise in these markets to advise and generate business. Theconcentration of expertise in many sectors in the UK means that we are well placed as a springboard to helpBrazilian firms internationalise. It is also relevant that the large number of Brazilian professionals in Londonprovides a pool of talent to assist UK practitioners to offer such services to Brazilian companies and largeBrazilian 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 aconsequence of many decades of low educational standards and limited opportunities to introduce specialisttraining. The private and public sector have realised that this shortage will be a barrier to further economicdevelopment, and is aware that improvement is needed to enable Brazil to cope with the impact of suchdevelopment. This awareness offers a range of opportunities for UK institutions. The UK is seen as a centrefor training in many professional services and this is an opportunity for expansion.



13. Economic developments in Brazil offer serious opportunities for further development of Private Equityin Brazil. Although it is increasing, capital committed to Private Equity is still relatively small. The regulatoryenvironment in Brazil is continuously strengthening and has favourable laws on fund formation and operationwith permissive regulations on institutional investors. The Brazilian Private Equity industry is acknowledgedto be the most transparent and best regulated of the four BRIC nations. Several studies have shown that PrivateEquity 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 servicesand is home to world-class practitioners in the field. We will continue to encourage HMG to support the sectoras 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. Theopportunities for UK companies cover a range of sectors: infrastructure, energy (including biofuels whereBrazil 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 theUK. Moreover, the increasing number of scientific collaborations between the UK and Brazil, where the UKis now seen as the scientific partner of choice for many Brazilian researchers, will mean that venture capitaland other means of finance will be needed for UK/Brazilian start-ups. This area offers huge potential forprofessional 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 politicalleaders, business figures and public personalities and that this will help the UK to regain lost ground in businesswith Brazil. We welcome the emphasis the Coalition Government has placed on Ministerial contacts withBrazil. We urge senior Ministers to visit the country regularly, to rectify the historic absence of high-levelvisits, and to carry out visits once they have been scheduled. We recognise the pressures of parliamentarybusiness on busy Ministers, but would urge them to schedule visits at times which would make it unlikely tocancel. In this context we regret the postponement of two senior visits in the first four months of 2011 andurge 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 theEU’s common commercial policy. For many years Brazil, despite being open to immigrants, adopted a policyof import substitution and was largely inward looking and often protectionist. There were significant barriersto market entry, and the low penetration of the English language led to difficulties for UK companies. Giventhis background, Brazil was and to some extent still is not well suited to companies new to internationalbusiness. But modern Brazil is changing and has many similarities to Europe in ways of doing business. Itshould therefore become increasingly accessible for UK firms. Support from HMG is vital across many sectorsnot least because other governments are very active in promoting trade and investment with Brazil. The UKsuffers 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 inBrazil and for treating Brazil as a priority. But we also believe more could be done and opportunities to raiseawareness within the UK should be increased. TheCityUK also welcomes the revival of the negotiationsbetween the EU and Mercosur (in which Brazil is the leading market) with a view to an EU-Mercosur FreeTrade Agreement.

18. The absence of a Double Taxation Agreement (DTA) between Brazil and the UK has been mentionedby several companies and business organisations as a barrier to increased trade and investment between Braziland the UK. This subject is highly technical, and not easy to resolve when both countries have such differentapproaches to DTAs. It has been discussed regularly at JETCO and elsewhere, although neither BIS nor theirBrazilian opposite numbers lead on the subject. HMRC have a global policy of adopting the OECD model fortheir 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 urgeHMG 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 privatesector will develop its own ways to increase its links with Brazil, but at the same time TheCityUK encouragesHMG to give Brazil the due attention it deserves and to devote high level time to developing the relationshipwith senior figures in Brazil, including reinstating the high level visits which were postponed and to avoid anyfurther postponements. TheCityUK also urges HMG to work further to encourage liberalisation in the servicessector, especially in legal services and reinsurance. We also recommend HMG continues to explore the potentialfor agreeing a Double Taxation Agreement with Brazil.

18 April 2011



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 aneconomic super-power, and its development achievements. Brazil is the country outside the G8 with the bestscience 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 benefitsfrom a secure neighbourhood and no significant international tensions. It is the most like-minded of the BRICs.Brazil is already courted by other countries seeking to share in its growth.

Strengthening ties with Brazil will help to promote a range of UK interests. Brazil is the 8th largest economy.It accounts for 55% of South America’s GDP and is forecast to become the 4th largest economy by 2050.Brazil will host the 2014 World Cup and the 2016 Olympics and will invest GBP 17 billion in related projects.

The importance of Brazil-UK cultural relations

There is high regard for UK expertise in science, development work, and public-sector management andreform. Brazil wants access to UK technology, science, universities and knowledge of how to run majorsporting 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 valuingBrazilian culture and dialogue with other cultures.

Research (over 2,000 young Brazilian aspirants between 16–34 years) shows that 92% view the future withoptimism and at least 50% said their view on life has become more liberal over the past six years. 85% ofinterviewees believe in the power of networks as a tool in their career progression. They are interested inmusic, culture, sports and family but expressed concern about violence, unemployment and drugs. YoungBrazilians make increasing use of communication tools. 84% use e-mails, 83% use social networks and 81%make regular use of SMS. Social and other networks are becoming more and more popular.

Where the British Council can make a difference

The British Council makes a positive difference in communities in Brazil through an internationalrelationship with the UK. We focus on English language, Higher education and research, Arts, and Sports. The2014 World Cup will be staged in 12 cities across the country and this provides a clear geographical focus forthe 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-qualityBritish Council materials, building appreciation and understanding of UK excellence in languageteaching.

— 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 (2012–13) Brazilian public opinion sees UK as creative andinnovative. New opportunities for co-operation in culture, education, innovation and policy reformidentified as a result.

— New UK-Brazil Cultural MoU leads to significant increase in partnerships between culturalinstitutions and a 25% increase in economic benefits from cultural exchanges.

— Five million Brazilians reached across Brazil through UK World Cup and Olympics programmesbuilding on International Inspiration using sport as a central theme of projects targeting youthorganisations 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 2011–12, of which £2.5 million is grant-in-aid.

English

Our English activities are in four broad areas: policy, teachers, learners, examinations. In 2011–12 at thepolicy level we will commission “English Next Brazil” to promote dialogue on the role and influence of Englishin meeting Brazil’s economic and development aspirations and this will lead to an International Conference in2012–13. English language levels in Brazil are low and there is strong demand evidenced by the strength ofthe private language school network—the 8 largest schools currently have 4,000 branches across Brazil teaching



more than two million students. We support teachers across Brazil through our free-access websites and a rangeof 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 2011–12we will support them through free-access online resources, mobile apps, and courses and learning materials forcareer pathways: English for IT, English for Hospitality and Tourism, English for Insurance. Our Exams servicewill support 3,000 Brazilian young professionals to achieve an international qualification or to take post-graduate courses in overseas institutions.

Arts

In 2011–12 a new MoU will be signed between DCMS, the Brazilian Ministry of Culture, the British Counciland Arts Council England to launch “Connections through Culture UK–Brazil”, a three-year programmefocussed on building strong relationships between cultural institutions in the two countries. We will organise aUK Contemporary Theatre Mini-Season in São Paulo and the Akram Khan Contemporary Dance Companywill tour three major cities. At the Conexões Youth Theatre Festival 16 youth theatre groups from all parts ofsociety will present new work from UK and Brazilian playwrights.

UK Season in Brazil 2012–13. The British Council is leading on the Creative UK strand of the UK Seasonand supporting Embassy-led Innovative UK and Live London strands. In 2011–12, we will focus on branding,fundraising and legacy including the establishment of a Creative UK curatorial group.

Education and Society

In 2011–12 we will work with 1,000 schools across the country through our Connecting Classrooms projectproviding 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 betweenBritish and Brazilian HE institutions in agribusiness, biosciences, marine technology and petrochemicals. Thiswill result in a significant increase in the flow of PhD students between both countries. We will develop aseries of high profile UK FE and vocational training road shows in sectors with significant skills gaps andshowcase UK expertise in meeting the skills needs of the London Olympics.

Our Sports education programmes will be strengthened in 2011–12 through collaboration with the Ministriesof Sports and Education and the UK’s Premier League. A Study Visit to the UK led by the Minister for BasicEducation will lead to proven British Council programmes being integrated into schools across Brazil as partof a government programme aimed to reach up to four million students by 2014. Premier Skills is a partnershipbetween the Premier League and the British Council, which uses football as a tool to engage with and developthe skills of young people. The Premier skills project will be developed through study visits in Brazil and inthe UK and there will be a pilot programme in Rio de Janeiro.

27 May 2011

Written evidence from the BBC World Service

BBC Global News in Brazil

Brazil is South America’s biggest media market and media ownership is highly concentrated. Home-grownconglomerates 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 socialmatters is commonplace.

When it became apparent that online access to the BBC was more popular than conventional radiobroadcasting, the Portuguese for Brazil radio service was closed (in 2006) and investment was made in theonline service in order to enrich its content.

The BBC currently offers online (Portuguese and English) and TV (English) services. The audience estimatefor 2010 was as follows:

Online: 1.4 million unique usersCombined 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 BrazilService is tasked with ongoing efficiencies of up to 10%, but because the Service has not undergone anyplatform changes or reductions in output hours, we are not predicting that this will have a big impact on theaudience size.

27 May 2011



Written evidence from BG Group

1. BG Group entered Brazil in 1994 and has interests across the energy chain. We have a controlling stakein Companhia de Gás de São Paulo—Comgás, the country’s largest gas distribution company; approximately10% share in the Bolivia-Brazil pipeline that transports gas from Bolivia to Brazil; and exploration andproduction acreage in five offshore blocks.

2. BG Group has invested $5 billion in Brazil since 1994. Activities over the next decade will see usinvest a further $30 billion, making us the largest British investor and one of the largest foreign investors inthe country.

3. BG Group is also planning to base the company’s Global Technology Centre in Brazil, expecting to spendaround $1.5 billion on R&D by 2025.

4. The main focus of our activities at the present time is in partnering Petrobras in exploration and productionactivities in the massive “pre-salt” oil discoveries in the Santos Basin. BG Group first acquired acreage in theSantos Basin in 2000 and secured ten new blocks in 2006, eight of them in partnership with Petrobras. BG hasbuilt up interests in acreage in excess of 6,000 sq km in the Santos basin, either in shallow or ultra deep watersand has taken part in many of the pre-salt discoveries Petrobras has made. We estimate the BG Group netshare of reserves and resources from the pre-salt discoveries at around 2.8 billion barrels of oil equivalent andthat 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 toworld crude markets and a growing domestic gas market.

6. Against this background, BG Group believes it is extremely important that HMG focuses on developingits 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 Group2010 Data Book. Both are available on the BG Group website www.bg-group.com.

6 June 2011

Supplementary written evidence from Mr Jeremy Browne MP, Minister of State, Foreign andCommonwealth Office

Thank you for the invitation to appear before the Committee on 8 June, and for the opportunity to discussthe Government’s plans for a revitalised relationship with Brazil. As I said at the time, the FAC’s interest inBrazil 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 Brazilnetwork’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 positiveand constructive attitude towards the international Arms Trade Treaty. Brazil has been a vocal supporter of anArms Trade Treaty (ATT) since the initial ATT Resolution in 2006. In its statement at the PreparatoryCommittee meeting in March, Brazil expressed reservations regarding reporting on aspects of the Treaty’sscope—specifically about whether all items and transfers within the scope of the ATT should be treated in thesame way. The UK is committed to securing an effective and transparent ATT, and believes reporting on armsexport licences should form an important part of this. Brazil remains a key supporter of an ATT, so we willwork closely with them to try to address their concerns on reporting. We will hold ATT discussions as part ofan FCO official-level visit to Brazil in July, when we hope to understand better the underlying cause ofBrazil’s reservations.

Last, you asked about Brazil’s non-signature or non-ratification of key human rights conventions. Throughour Embassy in Brasília we have regular discussions with the Brazilian government about human rights, andwelcome President Rousseff’s recent statement that she intends to make this a much stronger element ofBrazil’s international policy. The EU-Brazil Human Rights Dialogue is an important part of this discussion, inwhich 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 ofAll Forms of Racial Discrimination. Respect for individual rights irrespective of race, colour, descent, ornational or ethnic origin is a key theme of our discussions with Brazil, including during my visit in May thisyear. Brazil has certainly made some progress in its protection of individual rights. Its recent vote in favour ofa Special Rapporteur on Human Rights for Iran was extremely welcome. The UK Government has notdiscussed the amendment to Article 8 specifically with Brazil, but I have asked our Embassy in Brasília toencourage Brazil to accept it.4 Not printed.



Brazil has also not accepted the amendments to Articles 17 (7) and 18 (5) of the Convention against Tortureand Other Cruel, Inhuman or Degrading Treatment or Punishment. The UK Government has not discussedthe specific issue of Articles 17 (7) and 18 (5) of the Convention with Brazil, but I have asked our Embassyin Brasília to encourage Brazilian acceptance of them. This year the British Embassy in Brasília will bedelivering a human rights project ‘Combating torture and criminal justice violations in Brazil’, through theInternational Bar Association’s Human Rights Institute, which aims to have a positive influence on Braziliangovernment policies in this crucial area. The FCO is also funding work in Brazil by the Association for thePrevention 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 Covenanton Economic, Social and Cultural Rights. Neither has the UK. As these rights are realised progressively wedo not believe they lend themselves to third party adjudication in the same way as civil and political rightsand are sceptical of the practical benefits of the individual complaints mechanism. We have not discussed withBrazil its own position on the Optional Protocol.

It is also correct that Brazil has neither signed nor ratified the International Convention on the Protection ofthe Rights of All Migrant Workers and Members of their Families. The UK has also not signed or ratified theMigrant Workers Convention because we believe that migrants are already well protected under internationalhuman rights law, a position which Brazil shares. The rights enshrined in treaties like the InternationalConvention on Civil and Political Rights and the Convention Against Torture apply equally to all individualswithin 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 DeputyPrime Minister, along with three other Ministers, twenty business leaders, Vice Chancellors, culturalrepresentatives and sports officials. This proved yet another positive step forward in the relationship, with anumber of significant announcements on trade, education exchanges, science and innovation, developmentpartnership, 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 Foreignand Commonwealth Affairs, FCO

Thank you for your letter of 23 June on your recent visit to Brazil. Elevating our relationship with thisemerging power is a key objective of this Government. The Committee’s interest in Brazil is welcome indeedand 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 doubtsabout our sovereignty over the Islands, and the Falkland Islanders’ right to determine their own political futureis 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 Falklandspeople. Brazil is fully aware of our position.

On the particular instance you raise, our Ambassador made a judgement that the Committee’s meetings withthe Brazilian Congress were not an appropriate opportunity to discuss the Falklands as the Congress is notinvolved in policy on the issue. Media reporting of any discussions could have set back our efforts to findpractical 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 whichmaximise our prospects for success, which is not always in the full glare of media and public scrutiny. Youmention the Daily Telegraph article of 21 June. The tone of this article did not reflect the main focus of theDeputy Prime Minister’s visit, which was to boost trade and investment links. But the Deputy Prime Ministerdid raise the Falklands issue with Foreign Minister Patriota. I and others will discuss South Atlantic issueswith 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, westand ready to assist.

4 July 2011



Letter to the Chair of the Committee from Rt Hon William Hague MP, Secretary of State for Foreignand Commonwealth Affairs, FCO

I am writing in response to your letter of 23 June requesting background on why HMS Clyde was refusedpermission to dock in Brazil in late 2010, and subsequent discussions with the Brazilian government in relationto 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 fromforeign ships, and we must respect such decisions, we were very disappointed by this development. We valuethe 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, andwe have had subsequent discussions with the authorities in Brasília, including most recently by the DeputyPrime 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 DefenceMinister, 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 yourquestion 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, Argentinahas annually tabled a declaration in the OAS. This declaration is passed by consensus, with no vote, and haspassed every year since its introduction. The most recent declaration, “On the Question of the MalvinasIslands,” passed at the OAS General Assembly on 7 June. As your Government is aware, the U.S. governmentspeaks neither for nor against this declaration. Media claims that this year the United States sided withArgentina 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 furtherinformation on four points in a note from the Clerk on 26 July. In order to co-ordinate a quick response, theFCO 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 taxationagreement. Could the Committee be provided with an update on negotiations, and potential sticking points, atimeline 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 signedlater this year. There are presently no negotiations taking place on a double taxation agreement—previousdiscussions 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 by2014, could the Committee be provided with a summary of the recent changes, their expected impact on theUK 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 thesechanges?

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 havethe greatest contribution to make to the UK will continue to be welcomed under the student route. We believestricter 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



— 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 ayear and around 20,000 fewer visas issued to dependants each year. In addition, closing Tier 1 Post StudyWork in April 2012, but retaining a route into skilled, sponsored employment through Tier 2 should result in20,000 fewer each year staying in the UK to work. Once all changes have been implemented in 2013 weexpect that we should see a reduction in net migration numbers of around 60,000 a year. It is anticipated thatthe 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 withoutFrontiers” programme on 26 July 2011 with a target of increasing the number of Brazilian students in science,technology and engineering-related subjects spending a period of their study abroad to 75,000 by 2014. Anumber of countries, including the UK, have been approached by the Brazilian government as a preferreddestination for a portion of these students.

The British Embassy in Brasília has held discussions with the Brazilian Ministry for Education, Ministry forForeign Affairs and Research Council equivalent (CNPq) on how such a scheme might work within existingUK migration constraints. This would involve selected Brazilian students spending a period of less than twelvemonths at a UK institution as part of a wider course of study. The Embassy and British Council have alsohighlighted this programme to the UK education and private sectors and facilitated discussions betweeninterested parties. In June, a British Council-organised roundtable between UK and Brazilian Vice Chancellorstook place in Brasília, attended by visiting UK Ministers David Willetts and Nick Clegg and the BrazilianMinister of Foreign Affairs, on the education sector response to President Dilma’s proposal. Discussions werepositive with a commitment to set up a UK-Brazil implementation group to take forward higher-education co-operation agreed. The UK group will report to David Willetts. Further Vice Chancellor-led discussions areexpected 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 ofthe 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 fieldsto 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 Braziliangovernment 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 theconference and what does it anticipate achieving? Who will represent HMG at this conference and, ifpossible, what advice has been received from the Ambassador re: a Government representative?

Brazil will host the UN Conference on Sustainable Development (Rio+20) from 4 to 6 June 2012. Theconference will mark the 20th anniversary of the original Rio Earth Summit and will have two themes: greeneconomy in the context of sustainable development and poverty eradication, and institutional framework forsustainable development. Brazil has ambitious plans for Rio+20 and is planning substantial business and civilsociety components, with special sessions just before the main conference. Rio+20 offers an importantopportunity to promote the UK’s international growth agenda. It will address the interlinked challenges ofclimate change, food, energy, water and resource security, in particular to emphasise the underpinning role ofnatural resources in sustaining growth and lifting people out of poverty. Rio+20 will consider the institutionalarrangements 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 acrossgovernment, in collaboration with her Cabinet colleagues. Mrs Spelman is working closely with the Braziliangovernment to make Rio+20 a success. She visited Brazil in April and remains in close contact with herBrazilian counterparts. Mrs Spelman will be at Rio. Decisions on which other Ministers should attend will beconsidered as part of our preparations.

The British Embassy in Brasília continues to be in close contact with interested departments both inWhitehall and in Brazil on preparations for Rio+20.

4. What is the Government’s opinion on human rights in Brazil? Which areas require improvement, whatdiscussions have Government Ministers had with their Brazilian counterparts?

The UK Government welcomes President Dilma’s determination to strengthen human rights as a priority ofher leadership. Brazil has ratified most major international human rights conventions. Evidence of Brazil’smore positive approach internationally is illustrated by its vote in favour of a Special Rapporteur on HumanRights for Iran in the Human Rights Council in March 2011.

The Brazilian government is open to discussion of human rights issues. The UK supports human rights workin 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 inimplementing a £118,000 FCO-funded project entitled ‘Combating torture and criminal justice violations in



Brazil’. The FCO is also funding work in Brazil by the Association for the Prevention of Torture on effectiveimplementation 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 challengingdomestic human rights issues. These include violence and discrimination against women, discrimination andexclusion of Afro-Brazilians and indigenous people, rural violence and land conflicts, public security, policeviolence (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 governmentministries and NGOs during his visit to Brazil. Participants discussed improvements to the domestic situationin Brazil including torture and inhuman conditions in prison, forced labour, and ensuring equality for women,children, LGBT5 and indigenous and black populations. They also touched on the creation and strengtheningof national institutions, such as the Human Rights Secretariat. Jeremy Browne also met the Brazilian Ministerfor Justice Jose Eduardo Cardozo. They discussed cooperation on security and criminal justice issues and aUK-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 Rightsgroup 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 indigenouscommunities in the Amazon region, particularly in Manaus. The UK will continue to support Brazil to improvehuman 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 publishedin 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 sovereigntyover the Islands, and the Falkland Islanders’ right to determine their own future is paramount. This view iswell-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 theFalkland Islands Government has a legitimate right to develop a hydrocarbons industry in Falklands waters. Itadheres to all domestic and international laws.

While we reject any attempt to impede legitimate Falklands economic activity, it is important to note thatthe November 2010 UNASUR language on Falklands-flagged shipping to which the article refers is caveatedwith the need to adhere to “international law and respective domestic legislation”. Accordingly, we do notexpect Falklands or UK-flagged commercial vessels to be refused entry into South American ports, despitepressure from Argentina.

The UK has strong links with partners in Latin America, including Brazil. We will continue actively todefend the Islanders’ right to self-determination, while strengthening our relations with Brazil and the widerregion through closer engagement. We have rejected, and will continue firmly to reject, both in public and inprivate, Argentine measures which aim to damage the Falklands economy.

22 September 2011

5 Lesbian, gay, bisexual and transgender.

Printed in the United Kingdom by The Stationery Office Limited10/2011 012644 19585

PEFC/16-33-622

House of Commons Foreign Affairs Committee

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Transcript of House of Commons Foreign Affairs Committee