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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1949 -i
House of COMMONS
TAKEN BEFORE the
Business, Innovation and Skills Committee
Trade and Investment: Brazil
Tuesday 24 April 2012
Dr Andrew Jones, Richard Lapper, Roy MCGowan and Martin Raven
Evidence heard in Public Questions 1 - 50
USE OF THE TRANSCRIPT
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Taken before the Business, Innovation and Skills Committee
on Tuesday 24 April 2012
Mr Adrian Bailey (Chair)
Mr David Ward
Examination of Witnesses
Witnesses: Dr Andrew Jones, Managing Director of Planning, Design and Development, Aecom Europe, Richard Lapper, Financial Times, Roy McGowan, Director, Steer Davies Gleave, and Martin Raven, former UKTI Director in São Paulo, currently Vice Chairman of the TheCityUK Brazil Group and voluntary Council member of the Brazilian Chamber of Commerce in Great Britain, gave evidence.
Q1 Chair: Good morning, and thanks very much for agreeing to speak to the Committee. I will just ask you to introduce yourselves for voice-transcription purposes.
Martin Raven: Good morning, ladies and gentlemen. My name is Martin Raven. I am an independent consultant on trade with Brazil. I spent 34 years in the Foreign Office and retired in 2010. My last job overseas was Director of UK Trade & Investment in Brazil, which is the job that is also Consul-General in São Paulo. I acted as the nominal host to the Trade and Industry Select Committee when they visited Brazil in my very first week in November 2006.
Q2 Chair: Thank you. It will be a very different Committee.
Dr Andrew Jones: Good morning. Andrew Jones from Aecom. I am the Managing Director of our Planning, Design and Development group here in the UK and Europe. We are active in Brazil and have recently been awarded the commission to design the master plan for Rio 2016’s Olympic Village.
Q3 Chair: Thank you. The Committee, of course, made a visit last week to the Olympic Village, where we met Jason Prior, I think it was-one of your colleagues-and I have to say we were most impressed with the quality of the organisation and the project. There was no doubt it was the reason why you got the job in Brazil.
Dr Andrew Jones: Absolutely-we hope so, yes.
Roy McGowan: Hello, good morning. Roy McGowan. I am a Director of Steer Davies Gleave. We are a medium-sized transport consultancy and we have developed knowledge of working on stadiums and major events over the past 15 years. We have been working on stadium developments in Brazil for the World Cup 2014 since 2010, and we are working on nine of the 12 projects. Most recently, we have been undertaking quite extensive work on the Maracanã Stadium in Rio.
Q4 Chair: And you, Richard?
Richard Lapper: Hi, good morning. My name is Richard Lapper. I am the Financial Times’s Brazil Confidential Editor. Brazil Confidential is a fortnightly research report on Brazil, which we launched last year. I was previously, amongst other things, Latin American editor at the newspaper and was based in Brazil for five years between 2003 and 2008.
Q5 Chair: Thanks very much. We have got a lot of questions and we do not require every person to answer every question, unless you feel that there is something that you need to add or subtract from what another person has said and, of course, some questions will be person-specific. If I may start, this question is essentially to Richard Lapper and Martin Raven: could you just set the scene on the Brazilian economy for us? What are the recent developments and how do you think things are going to further develop?
Richard Lapper: Will I start, Martin?
Martin Raven: Please do, Richard.
Richard Lapper: I think there are three essential growth motors in the Brazilian economy at the moment: resources-Brazil has plentiful land, water, minerals, oil and gas; consumer markets, which are growing at around 10% a year-double Brazil’s GDP growth; and infrastructure, which we have indirectly referred to and which the Olympics and coming World Cup are very much part of. These are giving growth a lot of impetus, with some qualifications to that. This is all in the context of a longer-term stabilisation in the Brazilian economy that essentially began at the beginning of the 1990s with the conquest of hyperinflation achieved by the Government of Fernando Henrique Cardoso, with the Real Plan introduced in 1994. That process was consolidated during the 2000s, when President Lula da Silva, a former trade unionist, defied expectations and adopted cautious monetary policies and, to a lesser extent, cautious fiscal policies. That really set Brazil on the road to a more stable future.
I think two things happened in the 2000s that made the current situation possible: one of them was the entry of China into the world trade system, which had been happening anyway during the 1990s. China joined the WTO in 2001 and began to build up a lot of trade with Brazil. Brazil’s export mix is very well suited to China’s needs. Brazil is the second biggest producer-and possibly the first biggest producer now-of soya beans, which China uses as a feedstock for animal feed, and it is the world’s biggest producer of high-quality iron ore, which China uses for its steel plants. These two pillars helped develop the China-Brazil relationship that has become more and more important over time and, during much of the 1990s, allowed Brazil to run current account surpluses. Basically, China’s demand for those two commodities, and other commodities, is at the root of what we have seen with the commodity price boom. There was a volume effect and a price effect, from which Brazil benefited.
The second thing that happened in the 2000s was that President Lula, on the back of this economic stability, introduced various social reforms that led to a quite dramatic increase in the size of Brazilian consumer markets. Between 2004 and 2011, the number of people in the middle-income bracket in Brazil increased by 40 million. These are not middle classes in the way that we in Europe would understand them. They are lower-middle income groups; they are, really, better-off workers, I suppose. They earn between $700 to $800 a month and $2,000 a month by household. That increase has really turbocharged consumer demand in Brazil. It has really transformed the whole internal market and lots of things have followed from that.
How has that been possible? It has been possible because Lula introduced minimum-wage policies that helped shift what had traditionally been very high income inequality in Brazil. It made it more level. It is still an unequal place but less unequal than it was. He introduced a very successful social welfare policy, and quite an economic one as well-a policy called Family Basket, or Bolsa Família-which essentially provides the rudiments of a welfare state for many people who were previously marginal to society. He introduced changes that formalised the labour market. Brazilian unemployment has fallen very sharply since 2004. In addition to that, there has been quite a big extension of credit for individual consumers through new credit rules allowing banks to lend against future income-against wage slips. This is called crédito consignado, or consigned credit, and this has also helped supercharge the growth of domestic markets.
I think that is where we are. The third factor I should mention, really, is the infrastructure issue. Brazil traditionally has very weak infrastructure because it is such a big, federal country rather than a unitary state-there is a lot of latitude for individual states-and because so much of the country had been, until relatively recently, unexploited and undiscovered, almost. Its road, rail and air networks are deficient in many respects. In the 1990s, when the Government was under tremendous fiscal pressure as a result of the scale of the adjustment it was undergoing, there was underinvestment in infrastructure; in the 2000s, with this boom from China, Lula was able to spend more money on infrastructure and there has been quite a lot of change in that respect.
It still leaves a lot to be desired, and Brazil is spending 30 billion reais a year, or about $20 billion, on big transport and port infrastructure this year. It is not a huge amount, given the scale of needs, but it is beginning to happen. If you look at the quality of Brazil’s roads, in 2004 just over 60% of roads were good, okay or excellent; now, that number is 73%, so there is a significant visible improvement. This year, the new president, Dilma Rousseff, who took over at the end of 2010 and has been in office for 15 months now, introduced quite radical changes to privatise three of the country’s biggest airports. There are many problems with this legislation but it is quite an important change, I think, in terms of allowing for some of the problems with the airports, which are overcrowded and inefficient, to be addressed ahead of the 2014 World Cup and 2016 Olympic Games. On top of that, you have all these commitments that Brazil has to improve infrastructure, with the added pressure, of course, of Sepp Blatter and FIFA breathing down their neck, so there is quite a lot happening in that area too.
I think I had better pass over to Martin, but those are essentially the main contours of Brazil’s transformation economically.
Q6 Chair: That seemed to me to be a pretty comprehensive résumé, but I invite Martin Raven to add to that, or indeed to subtract from it, if you feel it is appropriate.
Martin Raven: Thank you, Chairman. No, I think I would agree with every dot and comma of what Richard said-an admirable survey, done completely impromptu. I have had a few minutes just to think about a few further points, and I do have some. I am sure most of you will have seen the piece on the BBC a few weeks ago that showed that Brazil has now the sixth largest GDP in the world, having overtaken the UK. Incidentally, that article on the website attracted 440,000 hits, according to a friend of mine at the BBC, which shows the level of interest in Brazil and I think is evidence that, as your Committee hearing is showing, Brazil is on the world stage in terms of the world economy and is a very interesting place to look at.
I think I agree very much with what Richard said about a lot of the statistics. Interestingly, on credit, credit as a percentage of GDP is still very low indeed, one of the reasons being that there is hardly any mortgage market in Brazil. It is growing, but the opportunity to expand the percentage of GDP given over to credit enables the consumption that Richard talked about.
I share Richard’s comments about the Government management. There has certainly been some extremely competent economic and fiscal management in Brazil since the mid 1990s, and I think that has been shown in policies and in the way they have been able to administer the economy. In terms of politics, the decision that President Lula made in 2009 not to try to alter the constitution to stand for re-election is very significant indeed. He had an approval rating that I am sure politicians in other parts of the world would die for; over 75% approved strongly of what he was doing and about 17% approved, so he had a 92% approval rating in 2009-10.
Q7 Chair: What is their media like?
Martin Raven: Very good-that was one of the points I was going to make. It is very transparent and very good indeed, and largely critical, I should add.
Chair: That is interesting.
Martin Raven: In contrast with a lot of, may I say, traditional Latin American leaders, he did not make any attempt to amend the constitution in order to stand for a third term. I think what that demonstrates, to reinforce one of Richard’s points, is political stability.
I think Brazil has a degree of natural confidence, thanks to its resources. It survived the 2008 economic crisis, and we can talk a little more about how they did that, but it survived that very well. It has a very transparent economy and, believe it or not, a transparent society, which has increased, thanks to the benefits of IT. Just in terms of its IT capacity, it might be worth noting that it has 100% electronic voting, and has done for a very long time, very successfully. That covers the whole country, which is pretty remarkable.
Q8 Chair: What are the percentage turnouts-that is probably not the right word.
Martin Raven: You have to vote. It is a requirement.
Q9 Chair: I see. It is more like the Australian model.
Martin Raven: Yes. It is worth saying, moving on to trade, that for most of the 20th century, Brazil was largely inward-looking. It had its major growth spurt between the ’60s and ’80s-that is when it had its double-digit growth, when the military were running the economy-but in terms of trade it was still, for most of the 20th century, very inward-looking, and less than 20% of its GDP is traded. Richard points out that China is now its biggest export market and biggest trading partner, but it is still in the sphere where the United States is, in terms of the majority of its business being domestic rather than international. That, of course, leads to the questions that you are going to be asking about why the UK’s performance on trade has been disappointing. I think the opportunities on the infrastructure side that Richard mentioned, which have been externally imposed as well as domestically desired, of the World Cup and the Olympics are a great force for good in terms of improving infrastructure, helped, of course, by the huge oil finds off the Rio and São Paulo coasts, which will enable the country to fund a lot of that infrastructure as well. I think I have probably said enough as well.
Q10 Mr Ward: I ought to add: in some parts of Bradford, we get 110% turnouts. I just have to ask this question: there must be some bad news.
Richard Lapper: Yes.
Q11 Mr Ward: What is the bad news?
Richard Lapper: I think the bad news is several things. I think the biggest problem that Brazil faces is surmounting the legacy of bureaucracy, red tape and Government structure. The scale of Government spending is quite high, at over 40% of GDP-quite high for a developing economy and quite high by Latin American standards. That problem is exacerbated by the composition of spending. A very large chunk of Government spending is directed towards paying pensions for the best paid civil servants. There is a process that Fernando Henrique Cardoso called state capture, which is the way in which vested interests-and I am thinking here of the judiciary, the military and senior civil servants in different departments-make a very good living. They retire very early, on full salaries. As a graphic anecdote, I remember a friend of ours who was a librarian and had retired at the age of 48 in 1998. They had come to London and were living on a pension, at that stage, of about £3,000 a month. This is the kind of phenomenon that Brazil produces, because of the way that state spending is skewed. That problem is being addressed, but very slowly. Again, in that respect, there is some good news to point out because, two months ago, President Rousseff introduced a reform to that system-quite an important, long-awaited, much-needed reform-but none the less there are other elements of state spending that also need addressing.
In terms of bureaucracy, the best demonstration of how Brazil needs to improve its act is the World Bank’s yearly publication of something called Doing Business, which measures countries by the ease of forming or closing a business or paying taxes. On this listing, Brazil finishes in the unimpressive position of 126th out of 183 countries. It is the third worst performing of the four BRICs, ahead of India. It is particularly bad in terms of the complexity of its tax system, such that the World Bank calculates that a hypothetical company with a turnover of $10 million and 80 staff would spend 2,600 hours a year paying its tax and filling in forms. This is because there are myriad taxes, both at Federal Government, State Government and Municipal Government level. There is indirect tax and direct tax. It is a very complex tax system that is bound up with the way that vested interests work in Brazil. State governors will always be struggling to maintain their share of the pie, and this has made it very difficult politically to change, despite the existence in the Government at the moment, with Dilma Rousseff, of a good deal of political will to address the problem.
It is still very slow to change. They are not proud about being 126th, and they are not anti private enterprise; in fact, there has been a good deal of business creation in Brazil. I was reading the other day that the small business enterprise unit gets 4,500 formalisation things it does a day. These are people like small hairdressers and builders, etc. This is a tremendous amount of formalisation, yet there is this huge difficulty, so you wonder whether, if they were able to speed up business formation and get red tape out of the way, they would be much more powerful.
This also affects investment opportunities in areas like infrastructure and oil and gas, because Brazil tends to be quite slow at getting projects organised and getting money spent. Again, there has been some improvement under Dilma Rousseff, but not enough. I suppose, to sum it up, Brazil is quite slow-moving and I think, on the markets, you get a lot of criticism of Brazil because it is not growing quickly enough. People very often mistake bureaucracy and complexity with corruption, and there is no doubt a certain amount of corruption in the Brazilian system, although I think that, generally, the hue and cry about corruption in Brazil is overstated. I think that the majority of corruption in Brazil is linked to political finance. Brazil is a very new democracy and only became one in its modern form in 1985, when the military left Government. The PT, which is the Workers’ Party and, I suppose, the nearest equivalent to a labour movement or party in Brazil, is very new indeed, formed only in 1980. Of course, we have had problems with political finance in the developed world; you can imagine these problems are much more acute in a developing nation.
Those are the problem areas. I would say, fundamentally, it is complexity and bureaucracy, and probably, to add to that, there is a bit of a problem economically linked to the power of this commodities sector. Brazil is not only a big producer of iron ore, soya and other commodities; it is also a very competitive producer. The land is hugely productive. They have also been very successful at applying technology to the land to make it more productive in areas that were previously out of cultivation-the dry areas in the north-east, for example.
The problem is that Brazil is so successful as a commodities producer, it has attracted large inflows of capital and has built up trade surpluses, and its currency is so strong that it has made it very difficult for its manufacturing exporters to keep exporting and made it very vulnerable to cheap imports from China. So the flip side of the China-export story is the China-import story, where you have Chinese imports in areas like textiles, electronics and clothes sending Brazilian companies to the wall. This year alone, four companies in a town called Brusque, in Santa Catarina state, which is known as the cradle of the Brazilian textile industry, full of German-immigrant-based companies, have gone to the wall. These are all famous names in Brazil, so there is a big debate in Brazil right now about de-industrialisation and the loss of jobs in traditional manufacturing.
This is quite a contradictory picture. On the one hand, you have a very vibrant services industry and lot of direct foreign investment in consumer industries, but you do have problems in the traditional manufacturing sector. Bureaucracy and de-industrialisation would be the areas one would worry about.
Q12 Chair: Yes. I am conscious that we are still on the first question and we have got an awful lot of others. Some of your answers actually have anticipated some of the questions, I have to say, but I think Martin Raven just wanted to come in on this.
Martin Raven: I have one further answer in terms of the negatives. I completely agree with what Richard has said, but education and the education system is certainly one of the country’s weaknesses. This is historic because, in the 1920s, only one in four Brazilian kids went to school. Under military rule, public investment in education was essentially in tertiary or higher education, so the schools are disappointing. The consequence of that for the economy is that there is certainly a skills shortage to cope with the growth. I see Andrew nodding. I think a lot of companies find that getting the right people is a problem.
Q13 Chair: Yes. I think we may touch on some aspects of this in terms of the relationship between British universities and Brazil, but I would just park that issue for the moment. I now open this up but brevity would be very welcome, and again some of the points I think have been made. Can Brazil sustain the current level of growth? If you like, there has been an expansion in-I was going to say the middle class-middle-income earners; can that be sustained as well?
Martin Raven: You want brevity.
Chair: Are you going to come in there, Martin?
Martin Raven: To be brief, yes.
Chair: I love that level of brevity.
Martin Raven: I think, in terms of middle income, one of the negatives but also one of the opportunities is the serious social and economic inequalities that have existed throughout history, and that is changing. I think there is an awareness. There is still a lot of ostentation, but there is more than just trickledown. There is, as Richard also mentioned, the Bolsa Família. There is an emerging middle class but the potential is huge because the resources are so huge.
Q14 Chair: I was interested in the point that was made earlier about the relatively small mortgage market and the level of credit there. I think it is fair to say that, as economies develop, the middle class and owner-occupiership increases considerably and, of course, the financial institutions that underpin them do as well. Would you say there is great potential there?
Martin Raven: There is also concern, and some of the popular press are critical of the increase in credit and the amount of borrowing. I was at a public event a few months ago with Jim O’Neill, who coined the term BRICs and wrote the original report, from Goldman Sachs, and one of the speakers said, "We are worried about credit." I asked him whether he thought that the rising level of credit was a problem, and he said, in two words, "Quality problem." He was quite clear that there was still lots of opportunity for more credit. I think, in terms of growth, it is an opportunity rather than a problem.
Richard Lapper: Just to add to that-I will not be long-there is an issue about interest rates in Brazil.
Chair: About interest rates, yes.
Richard Lapper: Interest rates are traditionally very high in Brazil, because the scale of state spending is so high, essentially. They have been coming down recently but, because interest rates are so high, it has made it very difficult to develop a mortgage market. Banks charge very high spreads on top of high interest rates, so mortgages are simply unaffordable for most people, even if they were available. That is beginning to change. The credit expansion that we have seen has been essentially around the hire-purchase-type thing of 1950s England. It is people buying for the first time consumer durables such as TVs, phones and stuff.
Q15 Chair: Thinking back to my childhood, when there were undoubtedly attitudes in society against credit, I can remember sneering at neighbours who bought stuff on the never-never. There was also risk aversion in terms of mortgages for households as well. Does that attitude prevail?
Richard Lapper: Brazilians have no shame when it comes to consumption.
Q16 Chair: No. Right. It is not a problem then.
Richard Lapper: They do not have an issue about it, no. It is a very consumer-oriented society. In that sense, quite like the US-more like the US than Britain of the past.
Q17 Chair: My final question in this batch: obviously, oil has been mentioned. Are there any oil and, indeed, currency issues that could be a problem?
Richard Lapper: There is an issue-
Chair: I was going to say you are unusually unforthcoming on this.
Richard Lapper: There is an issue about oil in the sense that there is a lot of oil but it is very difficult to get at. Petrobras is essentially the dominant player. It has got a system of joint ventures but it is the dominant player and it controls the sector and it is quite slow at organising the effort to get the oil out. It is a hugely ambitious programme. They are spending billions and billions of dollars to get this oil out, but it is very deepwater. It is unprecedentedly deep and it is being described as the technological equivalent of a space programme. It is quite a big job. On the other hand, these reserves are extraordinarily rich and big by international comparison. It is one of the top three in its reserves for the international oil industry.
Q18 Chair: Presumably, the price of oil at the moment is, if you like, an incentive to exploit it.
Richard Lapper: Without a doubt.
Q19 Chair: Are there any currency issues?
Martin Raven: On oil, it is worth saying that there is an environmental lobby that is rather embarrassed at the climate change implications of making all this money out of oil. That is a debate that is happening, but I think the oil extraction is going ahead and will win that debate.
Q20 Ann McKechin: Andrew and Roy have been very patient this morning. I just wondered, from your own experience, how things have changed, perhaps, over the past five years or since you have become involved with Brazil.
Roy McGowan: That is about the time scale. We first attended a UK Trade & Investment mission in November of 2008, probably the past four years. We are a company that has its head office in London; we are about 300 large in consultancy. One of our founding directors was from Chile, so we are a company that has grown a bit in South America over a 15-year period. We had an office in Santiago and we were looking at the Brazilian market, and I have to say the awarding of the World Cup to Brazil at that time became of great interest to us because we thought we had particular skills in stadium and major-event projects around our transport skills that we could, hopefully, demonstrate to the Brazilian market. Our first visit was in that November. Through UKTI, we were then introduced to the first members of the organising committees for that World Cup.
From there, we then started to attend other conferences, such as Soccerex conferences, and I was asked to speak at a stadium expo to design teams on crowd flow and public safety and how that linked into transport strategies. That is how we have grown that part of our work, but very much tied into us then opening an office at the end of 2008 with a very small number of people, but it was important that they were based in Brazil-the office is in São Paulo-and available to work with the design teams as they required. It is not something we could have grown if we had attempted to do that from our London office or even our Santiago office. It would not have been responsive enough, and it was important that we had members of staff who could speak Portuguese.
Q21 Ann McKechin: Both Martin and Richard have explained to the Committee really just the scale of the opportunities in Brazil. That’s clear for everyone, but I think the question is: why should British business take notice of it, given the very low penetration in the market over the past decade or so, and how realistic is it that there could be a very substantial increase in British business with Brazil in the next five to 10 years?
Roy McGowan: Yes. Our progress has been hard earned. It certainly has not just ballooned; we have had to build relationships and people have sought to use us-architects or construction companies-because we have developed a set of skills. It seems to me that, from what we have heard from Richard and Martin, the economy is going to continue to strengthen and grow. The development and expansion projects are going to continue to be there and, at this moment in time, the skills and that knowledge are not necessarily there, so there is an opportunity for a company like ours to continue to grow. We have found it more straightforward working with the private sector, which will offer contracts competitively, but there are contracts available that have fewer hurdles for us to try to overcome than the public sector, where the requirements can often be that you need to demonstrate specific experience in the very thing that you are being asked to bid for in that area, at that location, with that public body.
Q22 Ann McKechin: I am just interested in the experience of both you and Andrew, because you have mentioned, Roy, the fact that the key for your company was placing an office in Brazil. Do you think the fact that so few British businesses in recent years have located any physical presence to Brazil has been one of the reasons why UK business has not been particularly engaged with this country?
Dr Andrew Jones: It is an interesting picture when you get there. There is a great call for British and international expertise, and Britain can play a big part in that. We both come from the construction and design sectors, and that is a particular area where there are skills shortages locally. The education system, which Martin talked about, has perpetuated that, and also some of the opportunities that educated people in Brazil have taken either in Europe or in North America, and they are starting to go back but they are very expensive commodities when they arrive there. This creates an interesting market for us because you have that situation where our expertise is in demand and our global and international experience of doing something that is not Brazilian is also in demand.
You do, however, get very quickly to a situation where taxation rates for work in Brazil, between Brazil and the UK, are high, and that is a big barrier to entry. There are issues around contracting, and I think we have talked about public sector contracting in particular being very complicated and taking a great deal of time to work through. There are some very high barriers or challenges, in that you have to prove that you have the experience of doing the job before you get the job. The bar is very high to enter the market, hence it is difficult to get in there.
Our experience is that we have a presence in São Paulo and in Rio de Janeiro, originally in the environmental sector, working with the oil and gas industry, and that has given us a platform to expand and grow our team, because we want to get British people into the country and earn revenues there, because it is a lot more tax-efficient for the firm as a whole, but ultimately we want to bring that work back to the UK, because we have a team here with skills in-country as well. That is the balance and the play-off that we as an international company need to think about, and that is why some of the issues playing out are there.
Q23 Julie Elliott: I think my first question has been answered, so I will miss that one out. Would you agree that commercial success in Brazil requires greater persistence than perhaps in some other places?
Roy McGowan: It has required greater persistence from us than where we have been in, say, established markets, but I would not say it has been any harder for us to build the presence that we have there than in many other places. Perhaps we have had stronger expansion; we opened an office in Mexico at about a similar time and we have had slightly quicker growth there, but again, our two companies grow in quite different ways. We grow organically, job by job, and we will recruit a person or two people as we win more work in those areas. In terms of Andrew’s company, by comparison in terms of size, we are almost 300 and you are how many?
Dr Andrew Jones: Globally, 45,000, but about 3,500 in the UK.
Roy McGowan: Our experiences and perspectives are hugely different. We would not think of going to buy a company or a partnership; we grow that, as I say, piece of work by piece of work. As we are growing, we have to look to recruit, train and develop staff. They are very different models with different challenges. In comparison with other places, our growth has been hard earned but it has been steady. In terms of the work we have won, and as we have built our reputation, we have been able to increase our presence. I think it is going well but, having said that, there are all the barriers and the challenges that are there that we continue to need to overcome.
Dr Andrew Jones: You were asking whether it is more difficult in Brazil than elsewhere. 15 to 20 years ago, going into China was a real challenge of culture, language and business understanding, and indeed of business operations and construction in the country that enabled you to work in and out. If we look back at that, Brazil is no more complicated; in fact, it is probably easier than some of those marketplaces. India is another growing and emerging economy that, for us, is more complicated than Brazil. Closer to home, expansion into Turkey and Russia is all about having local connections and a local understanding, getting people who can speak Russian, Turkish or Portuguese-whichever is the local language-and getting in there. I do not think that Brazil is any more complicated than any one of those other places; it is just different, like they are all different, and you have to learn from scratch every time you go, and not try to impose your approach to business culture on something that is already very well developed.
Q24 Mr Ward: When we were in China, we were told about the success of Germany being there very early, particularly in terms of expanding its investment in the infrastructure of China, as well as engineering and manufacturing, etc. We have figures on the relative levels of investment. Who are the ones who are going to take this very seriously and who do we have to watch out for?
Martin Raven: There are more German international companies in São Paulo than there are in any single German city. The Germans are there in force. Everybody is there. To answer Ms Elliott’s comment, the playing field is level, to use the sporting metaphor, so there is no reason why British companies are in any way more disadvantaged. There is a level playing field but everybody is there and they have been there for some time. The French are very active, as are the Americans, Canadians, Italians, Portuguese, Chinese and Koreans. That is why British business needs to understand that, with a level playing field and with the complications that we have mentioned, it is a place where a lot of people are beating a path to the door.
Q25 Julie Elliott: Former Ambassador Barbosa said, "In a very open and competitive market, UK business companies lack aggressiveness." Would you agree with that or could you comment on that?
Roy McGowan: I cannot think of a piece of work that we have not secured where I would suggest it was down to a lack of aggression. We bid as competitively and as vigorously as we can for every opportunity that is available.
Dr Andrew Jones: I think we need to be very clear about what we want to get out of any one contract and be clear about our scope, our fee and the contracting arrangements, so that we have a successful project. I think that the very strong culture of relationships and working together on a piece of work is very positive and one aspect with Brazilian companies. We just need to make sure that we are delivering what we say we are going to deliver and not offer more and more and more, because the Brazilian business culture will take more and more and more. I think the aggressiveness is perhaps more clarity and being forthright about what we say we are going to do and delivering it, whilst developing that business relationship. I think that many projects could go horribly awry if you try to please your client to the nth degree, so we have to get that balance right.
Q26 Julie Elliott: You have mentioned bureaucracy in Brazil, but what has been your experience on the ground as companies in dealing with that bureaucracy?
Roy McGowan: We have expanded more quickly with our private-sector relationships than we have been able to so far with the public sector. I think we are making progress with that but it has been much slower, for all of the reasons that have been set out here. I think anything that can be taken forward by this Committee and by the representatives of the UK Government to enable that to open up further would be hugely helpful, because there are more opportunities for us to offer skills and be part of the increasing number of projects in Brazil, but it requires the market to be equally responsive, in a way, and to have fewer restrictions for us to be able to be involved in those.
Richard Lapper: Can I just say: in reference to some of these questions, I think one of the issues that British companies face is not so much a lack of aggression but a lack of capacity for staying power. By that, I mean that many British companies are too small to be in Brazil. They are not able to make the kind of investment they need. You need at least two or three years, I would have thought, to set up. I met a number of small companies in Aberdeen last year that are specialists in the North Sea and in deepwater, and are ideally suited to do business in offshore and the pre-salt fields. You would think that they would be rushing to Brazil, and they are, indeed, interested in going to Brazil, but the problem is that they want to do it on the back of cash flow. They want to make their investments and immediately start earning money, but they cannot do that. You just cannot do that in Brazil. You have got to spend money. Even just renting business premises or something is very complex.
I think the other thing that leaves British companies slightly disadvantaged against some of their continental competitors is the fact that Norwegian oil-supply companies, for example, will go behind Statoil and they will supply Statoil. For Statoil, it is a big investment, because it is a big player. Then you will get supplying companies supplying Statoil in Brazil, so they immediately go under the umbrella of the big player. That is not an option that is available to British companies and that is something that these guys in Scotland do complain about. It is not so much a lack of aggression or commercial nous, in a sense. They can see the opportunity just as well as anyone can. They just do not have the capital to do it. These small companies have a turnover of £5-10 million a year; there is no way they are going to spend the couple of million that is needed for three years in Brazil without earning any profit from it. I think that is the problem.
Dr Andrew Jones: I can build on that. Our experience follows that pattern. We have been working in Brazil and following the Olympic opportunities for two and a half years, most seriously in the last two. It is the time it takes and the amount of energy-as I said before, it is about relationships. Your potential clients want to meet you face to face and want to sit down. Face-to-face time is very important to them. You cannot do that from the UK; you have to be in-country. Very quickly, you get to the point where you need the resources both in terms of getting your expertise flying backwards and forwards between here and Brazil and also building a local presence, so that somebody can turn up tomorrow for a meeting and at least have a face-to-face conversation.
My concern here is probably for the SME sector: where you cannot sustain that on a regular basis, there are some very significant investment decisions that we have had to make in terms of sustaining and growing that presence before a contract is in place and before we can say there is money that is being earned for our business here. The challenges for those firms are quite high, and that is the place where some of our best expertise is. In the sport sector, there are people who are dealing with complex issues like crowd-flow modelling, how you get people in and out of an Olympic Park safely, and how you deal with disability and accessibility issues. These are either sole traders or small firms that have a particular piece of software or particular expertise. How do they engage in that market? It is very important that Brazil picks up on that, and there are things that Brazil could buy from Britain based on our experience, but the barriers to entry are pretty high for the SME sector.
Chair: Can I just bring in Rebecca Harris? I know she has some questions covering this particular subject.
Q27 Rebecca Harris: There are a few questions. When we received the Government response to our previous trade report, they promised quite a lot of progress on supply chain follow-through, and the first thing was to ask you how much evidence you have seen of that to date in terms of trying to get the smaller firms and the supply chain following through on the coattails, or, indeed, what success you have had in bringing in smaller firms on the coattails of your successful bids.
Roy McGowan: I think we are one of those small companies, so we are working very hard to grow by one or two people a year. As Richard said, that takes staying power. We have been there now for almost four years and we have a very good presence across those markets. We do have conversations with specialists that we know from the UK or from elsewhere in the world, and we have submitted a number of joint bids, where we will pool those skills together. We are able to-I do not know if the right word is "help" or "join up"-make a better fit with the project that is there, and that will be with architects who are particularly focused on, say, station schemes, and we are able to offer the transport-planning experience and they offer the architecture background.
For some of those bids, because we are registered in São Paulo and the other companies that we are bidding with are not, the fact we have been based there has enabled the bid to be made, because it would not have been possible to have done it with both of us just being registered from London. There is, then, some of that that we are doing, but I would not say that I could give you many examples of where we have been able to pull others through because, at the moment, we are pretty well working as hard as we are to grow what we have.
Q28 Rebecca Harris: It seems quite critically important, and this is a real problem to getting in there, so it is really what your advice is in terms of what you think UKTI should be doing more of or how you would advise British companies to work better together to get the best out of this.
Roy McGowan: UKTI helped us hugely and have continued to do so, particularly through their staff who are in Brazil, with the inward mission that they organised at the end of 2008. There was a particular area of research we asked them to undertake, which is called OMIS research, where they identified key people for the work that we do with stadiums and major events. We then went to a conference in Brasilia in the spring of 2009, and they arranged a whole series of meetings with those people. That is how we built our relationships, and that was fantastic. It is absolutely one of the reference points we have for where we were able to then build those relationships with the contractors, architects and the organising committee.
From the discussion that Andrew set out, and when I think back to that time and what would have been of greater assistance-and we had a lot of assistance anyway-is if there had been such a place as a British business centre that existed in São Paulo or Rio de Janeiro-a place where we could have rented four or five desks-
Q29 Rebecca Harris: Down to that basic problem of actually buying premises.
Roy McGowan: -and where these other sole traders and British companies, with UKTI and British Government support, had gone through all of that paperwork, and where we then almost just dealt with the problems of registering ourselves and getting our VAT sorted out, which is probably one of the longest fought registration areas that we have been in in recent times-we did get the number. But if there had been some desks we could have arrived at, with some IT and a receptionist to take some calls, that would have got us going a year earlier. I think we would have also been able to make more of the others sitting in that space, because we would have immediately built relationships, and you would have almost been forming a British company amongst yourselves, with all your variety of skills, and putting that together far more quickly than the amount of time it takes to get yourself set up, registered and going. That would have been a hugely important additional help.
Dr Andrew Jones: I think, for all of us, the connections and introductions that UKTI make on a cross-industry basis are absolutely fundamental as a fantastic way of getting over that first barrier to entry, which is knowing what you are doing, who you are talking to and finding the clients. That is fundamental. The next layer is about business support and perhaps unlocking-particularly for smaller companies that do not have a big corporate infrastructure, because it is a nightmare for us so it must be very difficult for people who do not have a corporate infrastructure-the taxation issues, VAT registration, and some of the issues around doing business in Brazil. As Roy said, it is about potentially having floor space, a touchdown space or an office address that you can use that gives you that locus in-country, which, as we were saying before, is so important.
The other point is that it is quite interesting that, when the various sector groups get together, such as sports and events, you do meet up with people from the UK who you know very well and who you have worked with before, but you also meet new faces who are also interested in working in Brazil and have different experiences to you. It is a very good networking environment, where we can start putting together new faces in our teams for pitches as we put them forward, so it strengthens the Aecom bid to a particular request for proposal and request from a client, as well as enabling other firms to come in with us in a sort of consortium approach that we would lead. This point about getting some of the SMEs working together and facilitating that, I think, is also very valid.
Roy McGowan: As London hosts the Olympic and Paralympic Games over these coming months, one of the most useful business-support measures that the UK Government could put in place would be to almost establish a British centre of excellence in Rio of games experience.
Q30 Chair: Can I just caution you there: we want to come on to that in a moment, so if you could just leave that, I think Nadhim has some questions.
Roy McGowan: I will leave that there.
Richard Lapper: I was just going to say that, in this respect, I think this layer of business support services is absolutely fundamental. The guys I met in Aberdeen have taken their own initiative-I do not know how far advanced it is; this was nearly a year ago now-to rent a building to share. There is some grassroots initiative in this respect, but I think it is something that UKTI is obviously very well positioned to feed into and, essentially, take over. It is very difficult for them to do, purely on things like language and so on. I think that it is fundamental. You cannot do anything. When you talk to British companies about the scale of investment they are prepared to make to go to Brazil, it is surprising to me that they actually manage to get there at all, because they do not seem to have the money for the return flight. A lot of small companies want to do things on the cheap. You mention a figure like £5,000, which is nothing in Brazil-you go through that in a few days-and it seems like you are asking the earth for that. In terms of their scale of ambition, they need more support and they need more help. It has to go beyond the contacts; it has to be about hard services even though we may be talking about very small businesses here.
Q31 Chair: Could I just clarify: are you saying that, from a media perspective, we might need more resources when we go to Brazil?
Richard Lapper: I think it is about how resources are deployed.
Q32 Chair: That is a politician’s answer.
Richard Lapper: If Brazil is, indeed, a foreign policy priority, more needs to be done on the ground to demonstrate that. I think one or two British companies are doing extremely well in Brazil. I do not think we should beat ourselves over the head and say that we have no presence there.
Q33 Chair: What I am getting at is the rigorous budgetary restrictions that MPs have to work with.
Richard Lapper: I do not speak for my populist colleagues.
Martin Raven: I was going to comment in terms of the advice that we used to give to a lot of visiting companies. We had SMEs coming as well as medium-sized and large companies. One of the key pieces of advice was to form a partnership and to work with a partner in Brazil. I think, from the discussion that I have been following, it would be ideal-it would be brilliant-if there was a business centre, but one of the first pieces of advice is certainly to build up the relationship with a partner. I think that is the way that you are going to succeed. Obviously, at the next stage, you might want to start a joint venture.
Q34 Nadhim Zahawi: Thank you. One of the questions I had is: how do Brazilians now view the UK as a trading partner? We have sort of touched upon bits of it, and I think Andrew mentioned the international dimension to UK companies as not being Brazilian, but what are the other things that you think are shaping that view of the UK as a trading partner? What do you think Brazil is looking for?
Dr Andrew Jones: Ultimately, Brazilian companies are looking for UK and international businesses that are working in country to establish locally and flourish in the Brazilian marketplace. That may be a representation of just where the market is at the moment but I think that it is a long way from the UK and it takes a day and a bit to get there, so it is the kind of environment where, because it is a relationship-based business culture, having people in-country is important. I think that they are wanting us to invest both for the British benefit back here but also so that the firms can flourish locally. They can be British firms flourishing locally but it is having somebody with a nameplate on the door in-country.
Q35 Nadhim Zahawi: I completely understand that, but let me try to guide your thinking a little bit. If you asked the Brazilian business community or the Brazilian decision-makers in Government how they perceive Germany as a trading partner, they would probably say, "Brilliant precision-making equipment and machinery for our factories." How are we perceived as a trading nation with Brazil? What are the things that they would identify with us that we are good at?
Martin Raven: People do confuse Britain, and the level of knowledge of Britain is, frankly, fairly limited. I should say they interchange the words "Britain", "England" and "London" quite regularly, which, to a group of non-London Members of Parliament, is quite difficult. Certainly, there is an awareness of big British companies. Rolls-Royce have been in Brazil for a very long time and people know about that. There is awareness of sophisticated engineering-Formula 1 is very popular and I think there is an awareness that the majority of Formula 1 cars are manufactured in the UK. There is a huge awareness of sport-the Premier League is ubiquitous-and there is a massive understanding of what Britain offers. There is an awareness of the City as a centre for both finance and for professional services and, indeed, the Lord Mayor goes every year to Brazil, and a lot of senior Brazilians come and enjoy hospitality in the City. I think that the link with the World Cup and the Olympics is very prevalent. The link between Macaé, which is the sort of Aberdeen of Brazil, and Aberdeen is strong. There are huge links.
In comparison with some of our competitors, I think we have different things to sell. There is a very strong link with France on a cultural background. There have been a lot of military links with France for many years, whereas the military links with the UK have been limited. The Germans have been very involved in the auto industry, as have the Italians. I do not think there is a single answer to your question, but what I do think is worth saying is that they have begun to realise that Britain is putting more and more effort and is back in Brazil in greater strength. I was talking to somebody just the other week who said that he had seen a resurgence of British businesses and companies, and it was quite clear that Britain was realising that Brazil was a country with great opportunities.
Q36 Nadhim Zahawi: Just a quick supplementary: I think Richard talked about the relationship between Brazil and China. Can you just talk a little bit about the relationship between Brazil and the US? What is that like?
Richard Lapper: Brazil’s relationship with the US is pretty good. I think that, at a cultural level, Brazilians are enormously pro-US. As I said before, their consumption habit is exactly a US consumption habit. This new, lower-income Class C identifies with US aspiration. On the other hand, I do not think that Brazilians at the grass roots particularly identify with China. There is a cultural friction there between China and Brazil; there is not between the US and the China. It is a complicated commercial relationship, principally, I think, because of US protectionism in agriculture, which is beginning to be eased. There have been some important moves in that respect around ethanol. Do not forget that the US is denying Brazil access, effectively, to a very attractive market for Brazilian agricultural exporters.
There are probably the remnants of a kind of nationalist suspicion of the big Uncle Sam figure in the north, but I think that is very much more limited in Brazil because of this underlying cultural industry than it is, say, in Mexico or elsewhere in Spanish America. I think that Brazil and the US have a lot in common. I do not think Americans necessarily understand that, but I think there is a lot more in common. There are some signs that this administration-Hillary Clinton was in Brazil a couple of weeks ago and was talking about this-does get it, but there is a problem in terms of public perceptions in the US as well about a lack of knowledge.
In terms of Brazilian perceptions of the UK and UK perceptions of Brazil, both cultures are quite pragmatic. I think Brazil, unlike Spanish Latin America, is a much more pragmatic place. It is not a particularly ideological country, so, in that sense, there is quite a similarity with the UK. It is a long history of gradual change that has characterised Brazil, over a shorter time span-over 200 years-rather than 1,000 years, but there is that sense of slow change and slow adaptability that, I think, are quite important parts of both British and Brazilian culture and really quite a good base to build on, because we are not an ideological culture and I do not think Brazil is either.
Q37 Nadhim Zahawi: We touched upon the Olympics. How important do you think the Olympic handover is as a potential turning point, and where are the potential spin-offs in terms of benefits from the Olympics to British business?
Roy McGowan: I think having games knowledge, and having companies who have been part of the design, development and implementation and then, for this summer, the experience of organising and delivering the games, is an absolutely unique set of skills to be offering. Richard and Martin have described the other countries and companies that are there competing. It is a fantastic opportunity for us to showcase the specific set of direct experiences that come with the delivery of the games. It is probably the most important thing we could put in place in Rio de Janeiro post London 2012. As the handover of the games takes place, there is the set of skills that can be drawn on for the delivery of their games. Clearly, that has to be achieved in a particular way. It is not going to be achieved by it looking like a UK games in any way, shape or form. It has to be achieved by the support and delivery of a Rio de Janeiro games. We would need to work in partnerships to deliver that, but it would be and will be a very important set of knowledge.
Dr Andrew Jones: You asked earlier what we are known for and what we are good at. I think design, both in architecture and engineering, and consultancy services is a huge piece of that. We are not bringing in lots of money with us, but we are bringing talent. On that basis, picking up on what Roy was saying there, that is the platform that we have.
The other aspect here is that London is being seen as a games that is very much on time and being delivered in a very managed way. All of those aspects of the games are going to be extremely good, both from the construction and infrastructure side of it. That is something we should be shouting about and those are some of the challenges of the bureaucracy and contracting issues we have been talking about in Brazil. They are real challenges in the Brazilian delivery of Rio 2016. Our platform should be one-a very strong one-of saying that we have the best and most recent experience; here we go.
The other point that we have to consider here is that the Olympic and major events process is one of a four-yearly cycle. When the handover from London to Brazil is happening, the candidate cities for the 2020 Games and the 2024 Games will be positioning themselves. There are two aspects of the opportunity that comes with the handover: firstly, it is about showcasing our abilities to deliver in Brazil, where many of the big decisions have already been made about delivering the 2016 Games. The big handover opportunity sits where we as a country can say that we can now help the next round of candidate cities, and get in at the ground and start working with them while they are still bidding, where a lot of the big decisions about who is going to do the work for them, how they are going to partner and the kind of Games they are going to deliver are still being made. London 2012 will be the place where that is brokered and those discussions will happen. The good thing about it is you do not have to travel for that because everyone will be here for those conversations. What is the platform for British companies to meet not just with Brazil and Rio de Janeiro but the five bidding countries for 2020 and whoever is putting their name forward and wants an informal conversation about 2024? Brokering that piece is also very important for this summer.
It is difficult for a British firm to have those conversations because of the marketing restrictions of London 2012, which are very understandable from a branding point of view, but it does make it very difficult to celebrate British expertise in front of that wider community. Our own host organisations are restricting that for commercial purposes. That is a challenge for us. The opportunity is not just with Brazil. The bigger opportunity is actually with 2020 and 2024.
Q38 Mr Ward: I am a little lost, because we have been all over the place. One thing I want to mop up is why, when we were talking about the perceptions of the UK and what we were good at, you did not include universities. Is that one that we could include? I know there has been big expansion proposed in the number of Brazilians studying abroad.
Martin Raven: There is actually a very low take-up for Brazilian university students overseas-less than 0.4% of Brazilian students study overseas. In general, Brazilians do not travel overseas for undergraduate education.
There is certainly an awareness of the quality of British education, whether it is at school or university, and in the technical engineering and scientific fields there is a growing collaboration. In 2006 we signed an agreement for a Year of Science, which took place in 2007-08. As a result of that, the Chief Scientist visited and we had a massive expansion in the number of collaborative PhDs. In 2009 Britain became the second largest country for collaborative PhDs between Brazil and a foreign country after the US. There is certainly an awareness of the education sector, and Universities UK went out on a mission in March. I was talking last week to a group of universities who were looking at the associated health professionals area, where there is potential.
That said, as I was saying before, there is still a low level of understanding about the UK. I am ashamed to say that I was taking a Brazilian to Oxford a few months ago, and he said, "What is Oxford famous for?"
Q39 Chair: Can I just come in on this? An article by Rubens Barbosa in December pointed out that the current Brazilian Government is interested in sending over 75,000 young Brazilians to study and complete their postgraduate studies abroad. There would seem to be an awareness at governmental level, but not perhaps culturally.
Martin Raven: That is absolutely true. The Government has signed an agreement with the Brazilian Government and has sent out missions. David Willetts was in Brazil last year to negotiate this. The reason for the Universities UK mission in March was to tap into this Science without Borders scheme. The Brazilians have this slight schizophrenia, because on the one hand they are very proud and very confident and believe that everything can be done in Brazil, and at the same time they respect the potential for collaboration overseas. What they are looking for is very much collaboration, rather than just going overseas, learning how to do it and then taking it back to their country. Dilma Rousseff also raised this when she was in the US a couple of weeks ago. They are aware that there are other countries with the potential to improve their education. It goes back to one of the points that I was making earlier on: they have a skills shortage and they know they need to exploit it.
Q40 Mr Ward: Do the Germans, the Italians and the French, who are doing so well in Brazil, all speak Portuguese?
Martin Raven: If you are a foreigner wanting to do business in Brazil, you should really make the best possible effort to learn Portuguese. Frankly, it is easier for an Italian to learn Portuguese, and it is easier for a Spaniard and a Frenchman to learn Portuguese. The Germans do manage it. You would not get a serious businessperson in most sectors in Brazil who did not have some degree of Portuguese, and a lot of them invest a lot of money in training and learning how to get by. You cannot get around the country without speaking the language.
Richard Lapper: There are two points there. I absolutely agree with that. You have got to speak Portuguese. Not enough British people there do speak Portuguese. Just in relation to the Germans, French and Italians, I do not think we are doing that much worse than they are. If you look at trade patterns over the past 15 years, their exports to Brazil have declined as a percentage of the whole along pretty similar lines to ours. Our investment to Brazil is pretty similar in terms of the size of the economy. Germany probably is doing slightly better, but I do not think that we are doing appreciably worse than the French or the Italians. The French have got Carrefour and Casino, but the British have Unilever-the British and the Dutch, I suppose. There is a sizable British presence in oil and gas: BG, Shell. I do not think we are doing that badly. If you look at the numbers, there has been, in nominal terms, a big increase in trade and exports to Brazil. It is just that Brazil’s overall trade has increased so much and China’s weight in that has become so dominant. It is not as if we are lagging behind the other European countries. The problem we face is the problem of Europe in general: how we compete in a world the BRICs are coming to dominate-the Indians, the Chinese and other emerging countries.
The other thing about Brazil is that its trade, not just with China but the rest of South America, has become much more important. We need to get the perspective right on this. I do not think we are doing terribly badly compared with others. It is not the insular Brits and the expansionist French. It is the Europeans that have a difficulty in this new world. Language is undoubtedly a part of that. It is impossible to manage anything unless you have people learning Portuguese, especially outside São Paulo. That goes to the point that it is a long process to learn a language. You cannot do it in six months or six weeks. You have to invest the time and money to do it.
Q41 Mr Ward: We have talked a fair bit about UKTI, and we also talked about big businesses and small businesses. Linking those two up, there was a concern that, because of targets that were being set, UKTI was maybe going for the easy meat of the big companies as they were easier to approach and get wins on. Have you found that at all? You were quite complimentary about UKTI generally, especially in respect of the small and medium-sized businesses. Is there any suspicion at all that the focus of UKTI is on larger as opposed to smaller businesses?
Roy McGowan: I have not noticed that shift, if it is a shift that is taking place. I would not have access to the numbers that say whether something has moved in that period. We have continued to find the support that we have had through UKTI in Brazil to be very important to us. We continue to attend functions that they arrange. Lord Coe visited one quite recently. As a company with a small office in São Paulo supported from the UK, we were invited to attend and participate in that as well. We have not felt excluded. If there is a change of focus, it is not something that has been noticeable to us, but as I say, I would not have the information that would measure that.
Q42 Mr Ward: In terms of the support from the Foreign Office and business ambassadors, do you have any experience of working with them?
Roy McGowan: Our chief executive attended one of the Foreign Office-arranged visits about three years ago. That would have been with Lord Mandelson. We found it beneficial in terms of helping to place our name in the country. It was useful at that level, but it does not replace in any way, shape or form building the relationships with the design teams and the architects and those people. That level of visit is helpful, but absolutely the introductions through UKTI to people on the organising committee and the people responsible for the delivery of the projects have been the key activities that have helped us. At the Foreign Office level, I imagine the discussions I referred to about the barriers to business and the changes needed across the public sector would be taking place.
Q43 Mr Ward: Have you come across business ambassadors?
Dr Andrew Jones: We have not, no-well, I have not in our location.
Roy McGowan: No.
Q44 Mr Ward: We read a little bit about JETCO. Do you have any views about its usefulness or profile?
Dr Andrew Jones: We have not been engaged with JETCO, so I do not have a view.
Roy McGowan: No.
Q45 Mr Ward: Apparently there are quite a lot of expats across there. Does that play any part at all in enhancing trade and providing a base for us?
Roy McGowan: I cannot provide any examples of where we have linked up with an expat community.
Q46 Mr Ward: What is the extent of that input in Brazil?
Martin Raven: In my time, there was a total of around 10,000 Brits across the whole country, of which about 5,000 were in the south. It is very small. The British presence is dispersed. That said, there is a most spectacular British Brazilian Centre in São Paulo. The building is not owned by the Government, but the Government, the British Council and the BBC lease space in a very impressive modern building with a lot of imposing art and the like, so it is a magnet.
Mr Ward: It is not a pub, is it?
Martin Raven: There is actually a bar on the ground floor, which has been renamed The Queen’s Head. It used to be called Drakes. It also has an auditorium, and we had a Formula 1 car in the lobby and things like that.
There is a long-standing Anglo community that went out to Brazil in the 19th and 20th centuries. You will bump into people with the name Forbes or Duncan and the like. Of course, in the agriculture and the meat sector, the Brits were very active. In the mining sector they were very active, but there is not an expat culture and there is not an expat community. The majority of foreign countries that run their operations in Brazil-I do not think SDG or Aecom follow this pattern-actually appoint a Brazilian. HSBC’s head in Brazil, for example, is a Brazilian.
Q47 Chair: Correct me if I am wrong, Martin, but I believe you have had some involvement with JETCO. Have you attended?
Martin Raven: I have indeed. I have attended every JETCO apart from one. I was there at the start in 2006. If you want a general answer to the question, I think it is an essential part of the bilateral trading relationship, because Government-to-Government links are very important in terms of maintaining the context and maintaining profile. The actual day-to-day, mechanical products are difficult to measure, but the process and the need for a Government-to-Government machinery is important, in the same way that Foreign Office and other ministerial visits are important. In answer to one of the earlier questions about the role of the Foreign Office, Jeremy Browne, who is the Foreign Office Minister for Latin America, has visited Brazil and South America more times than any minister has done in the past few years. This raising of ministerial visits is a good thing.
Chair: David, did you have anything else?
Mr Ward: No, I am fine.
Q48 Chair: I would like to pick up this expat issue, because there is a substantial Brazilian expat community in this country. Indeed, we had a charming Brazilian girl who used to work in the Members’ Tea Room. She got very friendly with the Scottish MPs at the time when Brazil knocked England out of the World Cup, I do remember.
Nadhim Zahawi: Not too friendly, I hope.
Chair: No, I am sure totally within the bounds of propriety. Is there anything being done to involve the Brazilian expat community here in expanding our trade to Brazil?
Dr Andrew Jones: Yes. When in Brazil we need to work in Portuguese and understand Brazilian building codes and approaches to construction, so employing a Brazilian in our UK office is very important as a broker of those cultural and regulatory issues. We have a small band of Brazilians and Portuguese working with us on projects based in London but being delivered in Brazil.
Q49 Chair: Does anybody else have anything to add on that?
Martin Raven: There is a very active Brazilian Chamber of Commerce in London, which co-ordinates a lot of activities and brings the Brazilian community and the British business community together. There are opportunities there. We have a group that I work with in the City that brings together Brazilians and British professional services companies. There are obviously far more Brazilians in the UK than there are Brits in Brazil. There are upwards of 200,000 Brazilians in the UK.
Q50 Chair: Interesting. Do you think there is any potential for developing that relationship?
Martin Raven: I think it is already happening. As Andrew mentioned earlier on, you find that a lot of Brazilians are going back to work in Brazil having left for employment reasons. They are now realising that there are actually more opportunities there. I find that there are also a lot of instances where there is a British bloke-as it is usually, I am afraid-who has a Brazilian partner, who gets the pull to go back and see her parents, and they go back and move to Brazil. I get a lot of enquiries from British guys saying, "I have got this particular skill and I have got this particular role. Do you think that there is an opportunity for me if I move to Brazil with my partner?"
In terms of doing something formally, I am not absolutely certain that there is a structure that the Government could introduce.
Chair: Are there any other questions from any other members? Thank you. That is a very comprehensive introduction to our visit and I am sure it will assist us enormously. We may well need to call upon your advice and assistance before we complete our report. As I usually say, we may well write to you asking questions that we should have asked but did not. Equally, you might like to write back to us if you feel there was a question we should have asked but did not and you would like to answer anyway. Can I thank you very much? It is very much appreciated. I am sure we are going to have a very useful visit.