CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 949-ii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

FOREIGN AFFAIRS COMMITTEE

UK-BRAZIL RELATIONS

WEDNESDAY 11 MAY 2011

NICHOLAS ARMOUR, TONY LAMB and PHILIP BROWN

PROFESSOR ANDREW HURRELL and DR MARIEKE RIETHOF

Evidence heard in Public

Questions 66 - 119

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Foreign Affairs Committee

on Wednesday 11 May 2011

Members present:

Richard Ottaway (Chair)

Mr John Baron

Sir Menzies Campbell

Mike Gapes

Andrew Rosindell

Mr Frank Roy

Sir John Stanley

Rory Stewart

Mr Dave Watts

Examination of Witnesses

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

Q66 Chair: I welcome members of the public and our witnesses today. This is the second evidence session of our inquiry into UK-Brazil relations. We are looking at the Government’s policy on a strong commercial relationship between the UK and Brazil, and later we will examine the rise of Brazil as an international actor on the world stage.

Our first three witnesses are Nicholas Armour, director of the International Group, Tony Lamb from UK Trade & Investment, and Philip Brown from the Trade Policy Unit at BIS. I welcome all three of you, and I will open the bowling. The Government say they want to increase their exports to Brazil. How will they do that?

Nicholas Armour: To be perfectly honest, I don’t think the Government will increase exports, but British business will do that with as much help as HMG can provide. A new UKTI strategy was launched yesterday evening, which will build on our successful track record to help to boost exports to Brazil over the years. As you know, Brazil is a designated high-growth market for UKTI, and we attack those markets through a programme of business activities-in this case, in both the UK and Brazil-to try to get business to take part in the undoubted growth in a BRIC1 country. It is a BRIC for no other reason than it is a high-growth market.

We have a series of high-value opportunities that we have identified from around 60 throughout the world. There are eight in Brazil that we feel are ready for systematic exploitation, and where there is a really good opportunity for UK companies to win significant business. Some of them obviously have a competitive interest there. The Petrobras investment programme is of critical importance, and the 2016 Rio Olympics, associated with the 2014 World Cup, present a wide range of business opportunities.

We are setting up some virtual project teams to ensure that we extract the maximum benefit for UK companies, where UK capability exists to meet the requirements. We expect an increasing number of ministerial visits to Brazil, and visits from people such as yourselves to build up Brazil as a normal destination for Britons to go to, whether on business or not, and to build up a relationship of yes, this is a place where we need to go and to be seen, and in a funny sort of way to make Brazil fashionable, which means that it is a place that people go to not just for tourism, culture, education and so on, but because it’s a place to do good business. As with all high-growth markets, the projected GDP growth is substantially higher than we are experiencing in the developed world at the moment, so it’s a good place to go to at a time when other economies are slightly flat. The FCO’s commercial diplomacy programme fund will allow for a series of projects to be organised in Brazil.

Along with the UKTI strategy announced last night, the Foreign Secretary announced the charter for business that the FCO is launching. It encapsulates the policy over there-I say "over there", because UKTI is of course an integral part of both the FCO and BIS-that with increasing ministerial visits and contact with Ministers from foreign countries across the board, everyone, whatever their portfolio, should have the latest on what business and what commercial opportunities we are trying to exploit for UK companies with that country so that we can seize every sensible opportunity to push that.

Q67 Chair: Can any extra help be given? Should we be coaching businesses? Are the ministerial visits useful? You briefly touched on ministerial visits and said that they were altering the culture slightly. The Lord Mayor is going. Is that useful? Do you think that we are on the right track at the moment?

Nicholas Armour: I do, for the simple reason that traditionally Latin America has been under-visited by significant Britons. If you will allow me a slight moment of cynicism, normally a Prime Minister will go and declare Latin America to be discovered and then that is the last time they can go. That happens for very understandable reasons-it is quite a long way away. The fact that we have had a fairly sustained programme of ministerial and high-level visits, such as yours, over the past two or three years and established the Joint Economic and Trade Committee back in 2007 to take forward that element shows that there is a growing commitment.

It is not enough just to visit, because we have to achieve something at the end of it. It is fine, and Brazilians like receiving visitors, because they understand the importance of it. They understand the importance of the Foreign Secretary’s Canning House speech and putting Latin America there. Latin Americans generally will take heart from the network shift that is putting more resources particularly around the prosperity agenda, which the Foreign Secretary announced in the House this morning. There is demonstrable interest in Latin America, with Brazil very much within that, and we must now put the substance there.

Visits like yours tout British excellence not only to attract inward investment, but the excellence of the product that we have to offer and that the country should be buying. To all intents and purposes, Brazil is a developed nation. It has huge middle-class and consumer purchasing power that is probably larger than in the United Kingdom. We jolly well ought to be selling into that, at least at the levels that we export to the rest of the world.

Q68 Chair: As for the Government’s pledge to work towards an EU and Mercosur free trade agreement, what is the state of play with that at the moment?

Nicholas Armour: I will turn to Philip on that, if I may.

Philip Brown: The state of play is that it was relaunched in May last year having been suspended in 2004. We have just had the fifth round, but we have not had a read-out of that yet. Negotiations are not moving forward that quickly. Normally, a free trade agreement takes a few years to negotiate. For example, we hope to conclude the India one this year, and it is nearly four years old already, so we cannot expect progress too quickly.

At the moment, there are a number of sensitivities around a trade agreement with the Mercosur region. Agriculturally, the EU is incredibly defensive. Mercosur is the most competitive exporter in many of the most sensitive areas, such as beef, poultry and dairy. One of the challenges in the free trade agreement is whether the EU itself can come up with a good enough offer. The European Commission has just released a preliminary impact assessment showing that some harm would be done to particular sectors in certain countries, which means that we are at a difficult point in the EU. Because of the appreciation of the real and a number of structural issues, Mercosur itself, particularly Brazil, is quite sensitive on the industrial sector, in particular. There is protectionist interest, too.

As for the progress of the negotiations, a lot of work has been done on the rules. There is already a platform to build on from where we were in 2004. There has not been an exchange of offers yet. An exchange of offers is subject to further EU consideration with particular concerns from some about the agricultural impact. Brazil and the other Mercosur countries need to go through their own processes.

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

Q69 Rory Stewart: To follow up on that, there will clearly be advantages for the UK’s economy from the free trade agreement, but can you talk a little about the potential negative impacts on the agricultural sector?

Philip Brown: The preliminary analysis has just come out. We have had a look at it, and we have gone back to the Commission. Our Minister, Edward Davey, will be saying the same when he goes to the Foreign Affairs Council on Friday-that we need to do a full analysis of it. The initial indication is that the beef sector is the biggest area that would be affected. That means that northern Scotland and Wales are two areas that this would affect. The overall initial analysis-as I have said, it is just a preliminary analysis at this point-shows overall net gains across the majority of sectors for Europe.

Q70 Rory Stewart: Which sectors predominantly?

Philip Brown: For the gains?

Rory Stewart: Yes.

Philip Brown: On the agricultural side, we would expect it to be the more process side, rather than the raw products, of which the UK is quite a big exporter. Scotch whisky-

Sir Menzies Campbell: That’s a relief.

Philip Brown: Yes. Scotch whisky is 25% of food and drink exports; it is one of the most effective lobby groups that we speak to. It is very keen on this FTA in terms of the opportunities that it will create for its members, particularly in the Brazilian market. It will mainly be in industrial sectors, though, that we benefit most. Mercosur and Brazil have very high tariffs-10% or 15% on average, and some are as high as 35%. We see a lot of benefit there. For us, of the main exports at the moment, pharmaceuticals is a big one. That will be very good for UK industry. There is some heavy industry as well, and chemicals; they are some of the top export areas. There is also the service industry. At the moment, we have quite a lot of UK investment there. Lloyd’s, for example, is very keen to get the playing field levelled on some of the regulatory issues around insurance and reinsurance. We would also look for liberalisation and market opportunities on legal services, accountancy and financial services more broadly.

Q71 Sir Menzies Campbell: I wonder whether I might go back to the generality of the approach. There has always been a sort of sense that the Americas fell within the backyard of the United States-that is not very geographically accurate, but it is politically accurate. As you have described, this is a market of enormous potential. Will we find ourselves, as it were, in rivalry with the United States? If so, will there be any political fallout from that?

Nicholas Armour: I will ask Tony Lamb to add anything if he wants to, but I will just say to start with that, in my limited experience of dealing with Latin America, and I come relatively fresh to this, the further south you go in the hemisphere, the less there is a pervasive American culture. Once you get beyond Columbia, it is the case that our European partners, particularly the Spaniards and so on, are our competitors in investing in those economies. Particularly in Brazil, we really do quite well, largely on the back of the oil and gas sectors-the energy sectors. BG’s investment in pre-sal oil exploration and so on is the largest such investment in Brazil. There may be limited sectors, but we are quite big in terms of that. Down that far, the Americans are not too much of an issue.

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

Q72 Sir Menzies Campbell: But there will be others seeking to capitalise on this emerging economy-I suppose you would call it an emergent economy, rather than an emerging one. The competition may be pretty fierce.

Nicholas Armour: They used to say that the city in the world with the largest number of workers employed by German firms was Sao Paulo-that is the sort of level; it is ahead of any German city. But, then, it is a city of about 23 million. So, yes. We were hugely big in Latin America; we built the railways and all that sort of thing. Then we disinvested substantially to pay for the Second World War, and we are now finding our way back.

Can I add one slight point on Mr Stewart’s question? Our top five UK exports to Brazil in 2009, which is the year I have the latest figures for, were medical and pharmaceutical products, chemical materials and products, iron and steel, organic chemicals, and power-generating machinery and equipment, which supports Philip’s view of the sorts of things that we are doing. Therefore, we will be happier to see lower tariffs.

Philip Brown: Let me quickly add on free trade agreements from the perspective of where that stands with the US. One of the advantages of this particular free trade agreement is that no major developed country, including the US, has an ambitious trade agreement with the Mercosur area. So, this is one of the few times where this will give the EU truly preferential access to what is quite a closed market. If we can get this one moving, we can get a head start on others there.

Q73 Chair: How closely are UKTI and the diplomatic staff working on this? How integrated are they?

Nicholas Armour: Totally, I suppose.

Chair: After today’s statement, that is what I would expect you to say.

Nicholas Armour: Not only because I joined the diplomatic service 36 and a half years ago and I am still in it, although I run things in UKTI on and off-

Chair: Congratulations.

Nicholas Armour: Thank you very much. There is one other member of my intake left, but three of us are dead. I think in London it is rather odd. We are all in Whitehall, but with the physical separation of buildings you end up working in your silos. For most of us, the experience is that posts overseas are much more integrated than London gives them credit for.

Q74 Chair: How many of the UKTI team in Brazil speak Portuguese?

Nicholas Armour: Almost all of them, because most of them are locally engaged Brazilians. Certainly, the director of UKTI in Brazil is married to a Brazilian. So is his deputy. His partner is also Brazilian and he served in Lisbon before. The head of our team in Rio is married to a Brazilian.

Q75 Chair: So there are good geographical knowledge and language skills, which is what we are quite keen on in this Committee.

Nicholas Armour: Correct. I am fully behind the Foreign Secretary’s statement today.

Chair: Moving on now to the trade relationships. Rory.

Q76 Rory Stewart: May I begin by following up a little bit? There is obviously enormous benefit to UK exporters in this free trade agreement, but they are a bit of a threat particularly to things such as the agricultural sector from Brazilian imports. How do you, as UKTI, balance anxieties in the UK about Brazilian imports against your own agenda of promoting UK exports to Brazil?

Philip Brown: Our starting point for free trade agreements as the UK is that we generally have an approach to open markets and we see the benefits of both exports and imports. I guess that that is the fundamental starting point. Our overall view of what we want to achieve from our side would be, quite simply, maximum liberalisation possible as quickly as possible. Clearly, you do not quite get that. We have certain areas that are most important to us, and we push hardest on those.

Domestically, the European Commission, as I have mentioned, has just launched the preliminary impact assessment. It also has a sustainable impact assessment that looks at a slightly wider set of issues and some development issues. We would look at those, and we would want those to be taken into account. On the whole, our approach is that in order to get an ambitious deal there has to be movement from both sides. For example, in the agricultural sector, our DEFRA economists are looking at it now. We will look at the full report and will then make an assessment of the impact and also make an assessment of how that could be mitigated. For example, you can mitigate it over a long liberalisation period, so you get much more time for adjustment. That is probably the optimum way of doing it, because you still liberalise, but you do it over time. You could also look at other matters; for example, putting in place quotas, which again might restrict the level of impact and mean it is easier for the UK Government to manage and, in this case, for farmers or business.

Q77 Rory Stewart: Thank you. I suppose the other anxiety about Brazil is that we are at the moment in another one of these phases of being immensely optimistic about the Brazilian economy. In the past 150 years, there have been many moments when we were immensely optimistic. Often that is driven by commodity prices, both in the past 150 years and indeed if you look at Brazil today. There are elements, despite all the liberalisation and progress, and some warning signs that we have an economy here increasingly dependent on commodity prices. In fact, were commodity prices lower, they would not be running a surplus at all; they would be in deficit. They are still running a relatively state-led investment programme right the way across Brazil. Are those things a concern? Do you have any comments on the structure of the Brazilian economy-what its potential downsides are and what risks it potentially faces?

Nicholas Armour: I do not think that any of us, in our current jobs, are economists. The Brazilian economy is booming. Undoubtedly, there are opportunities for British companies that we need to bring to their attention. If our normal global trading rivals are doing successful business there, we should be doing so, too. If I understand the implication of your question, you are saying that this bonanza may not last. We are saying not that you must go here because it will last, but here is something that your competitors are taking advantage of and perhaps you ought to be too, particularly as markets elsewhere are somewhat flat. In our formal trade talks, there are always a lot of issues around market access and so on.

As I think I have already said, I came to Latin America relatively late in my career. The one thing that has always struck me is Brazil is almost entire unto itself. It does not need the rest of the world. It has agriculture, resources, very sophisticated industrial processes, a large manufacturing base and the sixth largest aerospace industry-perhaps it is fourth largest. If we all disappeared, it could live on happily, perhaps with a slight cultural loss. It is really up to us to say, "They are going to go on leading lives the way they are. Let us try to seize the opportunity."

Traditionally, we are a very entrepreneurial nation. We may not have the language skills, although our staff there have, but we should be seizing those opportunities. There is a huge middle-class consumer base that wants the sorts of things that we offer. As it becomes more sophisticated and opens up to the rest of the world, it will want to be a global player, so let us exploit that for what goes with it-the soft power and the hard sell.

Q78 Rory Stewart: What lessons can be learned from how slow the UK has been to move into the Brazilian market? It was even relatively slow-2007, I think-to begin negotiations on trade barriers.

Nicholas Armour: I don’t know. Would somebody else like to talk while I think of an answer to that question? I deal with quite a lot of high-growth markets. I deal with a broad band from Russia, through Turkey and the Middle East, Africa and Latin America and so on. Logically, therefore, I ought to be able to compute the lessons to a model that will work successfully almost anywhere, but history and the world is not like that. Each market is, in many ways, sui generis.

I mentioned earlier on the question of fashion. I have found that markets become fashionable-not because Government makes them so but because business suddenly decides that this is the place they need to be. China, which is not my patch, was a fashionable market way before anybody actually made any sensible money there. Why was that so? It just became the place that you had to go. In a way, perhaps that is what Brazil should become, too. Whether it will be more successful than some of the other markets, I am afraid that I do not know.

Q79 Rory Stewart: Finally, what are you doing to promote UK agriculture in Brazil? One of the great skill sets that we have in the United Kingdom is a highly productive, well-developed agricultural sector. Some of our competitors-Australia, New Zealand and the United States-have been very good at penetrating markets, especially China. What are we doing to make sure that British farmers in the agricultural sector are getting in to Brazil and offering all that we can to promote agriculture in Brazil?

Tony Lamb: It is not agricultural, but in 2009 we signed an agreement with the International Agri-Technology Centre and Embrapa, which is the Brazilian agricultural institute, so there is a formal arrangement in place to promote closer relationships within the sector between the UK and Brazilian industry. There is activity in place.

Nicholas Armour: As Philip said earlier on, we are probably better in processed foods, including whisky and so on. What we find with the high-growth markets that we are looking at-we structure ourselves sectorally to a certain extent and we have our business advisory groups, or whatever they are called under the new strategy-is that business people from the sector say, "These are the five or six countries in the world where we feel that, with the support of UKTI and the Government more generally, we as a sector should be making a great push." We have a list somewhere of what those are for Brazil, but agriculture is not among them.

To the extent that our agricultural sector is not saying that Brazil is more important for it than some other markets, we therefore tend not to say, "But you’ve got it wrong, O agriculture sector." As you know, the Government are very responsive to their business clients about what they want us to support them in doing. Of course, we will help to lead where we think they are missing some tricks, but if they say, "No, this is where we want to be," then fine.

Philip Brown: From a free trade perspective, the free trade agreement-if and when it’s concluded-will eliminate most tariffs on agricultural goods, so the opportunity is there. Free trade agreements also deal with things such as phyto and cyto-sanitary standards so, for example, animal food and animal welfare standards might also be included in that. Those are prohibitive-I don’t know the details of them-in Brazil at the moment. The FTA should help to eliminate those as well.

Q80 Mike Gapes: You mention a number of different sectors in the economy. Which are the most important ones if our Government is to reach the goal of doubling our exports by 2015?

Nicholas Armour: I should not have mentioned priority sectors, because I knew that was going to be the follow-up question. There are myriad bits and pieces of paper, but I don’t actually seem to have a list of the current ones that we are looking at. I would say two things: one, to repeat the list of areas where we have the highest number of exports; and also, to draw attention to the areas that JETCO2 is specifically looking at, if I can find the piece of paper-could you look for it?-which lists the main workstreams.

At the moment, the focus is very much on the infrastructure requirements that both the Olympic Games and the World Cup are going to bring, not just with getting the stadiums built, but the huge requirement for airports, the security aspects, the power that they will need and all that goes with that-the whole aspect of upgrading Brazil’s infrastructure to meet the requirements expected of Games in the 21st Century. Did you find that list?

Tony Lamb: To add to Nicholas’ point in terms of the priority sectors, obviously energy is a top priority. Nicholas mentioned earlier the pre-salt finds that were discovered just off the coast of Brazil. Certainly, companies such as BG and Shell are looking at opportunities, so there are opportunities for those companies and others in the energy sector. Infrastructure, energy and in and around education as well are the areas, plus of course financial services, which we will see more and more of with the Lord Mayor’s visit next month.

Q81 Mike Gapes: On that point about the City of London, is that particularly important and what are you doing to promote that relationship following the Lord Mayor’s visit that you have referred to? Given London’s global role, how big is that in Brazil at the moment and how much bigger can it get?

Nicholas Armour: HSBC, for example, has a huge operation in Brazil. It is one of its largest and most profitable in the world, so it is there. We have mentioned before that BNDES3 chose to set up its first other hemisphere operation here in London. BOVESPA, its stock exchange, has also set up here as well, so links are developing. President Lula was here a couple of times over the last 12 to 18 months, largely in the City, pushing that sort of thing. The Lord Mayor is going, as we know, and will take with him a range of people in the legal, insurance and financial services-the sorts of companies that go with Lord Mayors.

There is so much wealth in Brazil that it is inconceivable that TheCityUK-which, as you know, is set up as a trade association for financial and related services in the UK-should not be exploiting that to the best of its ability. Sorry to sound a little incoherent on that, but it is so important that there is a separate financial sector group that keeps an eye on that. I know they are doing that, and that is why the details are not quite at my fingertips.

Tony Lamb: And Lloyd’s of London has its Brazilian office up and running, which is a recent establishment as well. That is another sign of opportunities for the City.

Q82 Mike Gapes: Are other countries competitors in this and trying equally hard, or does London’s global role mean that people look to us first? What is happening with Shanghai, for example? What is happening with Hong Kong? Is there a similar interest from that part of the world or New York?

Nicholas Armour: New York is not too much of a problem; at least, I have not heard of it in that context in Brazil, although others will correct me if I have got that wrong. The preoccupation for Brazil vis-à-vis China is much more about competition for industrial goods. Part of the reason why I think it has been quite difficult to get the FTA sorted out is that they are very worried about what happens if China is able to flood the Brazilian market with their cheaper industrial goods and so on. To the extent to which Brazil now relies on purchases of its raw materials by China, it is building up a trade relationship with which the Brazilians do not seem entirely comfortable, as it is quite a dominating one. I think that is another reason why they are also looking to aim off a bit by developing their relationship with the EU.

Q83 Mike Gapes: Can I take you back to the question of how British business can benefit? What about small and medium enterprises? We have been told that there is a lot of success in Brazil based on personal contacts. Given that British small and medium enterprises will inevitably be limited in what they can do at that level, how can they be assisted by yourselves or others to get into the Brazilian market?

Nicholas Armour: The short answer is: with difficulty, largely, because of its distance and cost. Distance also involves opportunity cost. The longer answer is that, particularly under the new UKTI strategy launched yesterday and given that the focus of our current Minister for Trade and Investment, Stephen Green, is very much on the importance of SMEs to the health of the UK economy, they are fundamental to ensuring that we remain able to pay our way in the world. That is the message that he repeats regularly everywhere. We know that SMEs that export, by necessity become more competitive. Therefore, they are more robust and healthier; therefore, they last longer. SMEs that do not export have a much higher incidence of dying. SMEs are critical.

What does that mean in terms of Brazil, which is a long way away? It is great if part of a supply chain leads into some of these big infrastructure projects. It is great if a bespoke-type company has a niche operation that Brazilians need or want. I just throw in some circumstantial evidence. We always knock ourselves for our inability to speak foreign languages and so on. That is why we have difficulty selling around the world. Somebody-an unproven-pointed out to me that in fact our SMEs are marginally better than some of our bigger companies, because they tend to go to countries where they have that personal link: they have married a Brazilian, or they have been on holiday there and met somebody drinking in a bar. "What do you do?" That is how they set up the relationship as an SME. It often starts from that very personal relationship, rather than in some of the big companies, which say, "I have a product; I’m going to come and try to establish a personal relationship on the back of that."

Philip Brown: Let me give an example from another free trade agreement that we concluded recently, which will go live in July. It is the Korea FTA.

The UKTI, along with BIS, produced a report-I think it was called "100 Business Opportunities for UK Business". In simple terms, it illustrates what it would mean in terms of new opportunities, reduced tariffs and opportunities to invest in other sectors. It was quite a big launch. It was very much aimed at SMEs, because you tend to find that the big companies-for example, in Brazil you have something like £4 billion of investment in the financial services sector-can often find ways around the regulations, whereas SMEs find it more difficult. That is a practical example of what we can do.

Q84 Mike Gapes: We have also been told about the buy Brazilian policy from the Brazilian government with regard to the oil industry. What is your reaction to that? What is UKTI’s approach? Are you going with the grain, or against it?

Nicholas Armour: Both-[Laughter.] If you want to get across the stream to the other side and it’s fast-flowing, you go with the stream and edge across.

There will be certain things for which you go with the flow at any given moment, because that is the way to do it. However, we have regular opportunities to speak to the Brazilians, whether in the course of normal business through the ambassadors or on business with Ministers or JETCO. We may say, "You do realise that this particular issue is counter to your undertakings with WTO4 or whatever it is. You do realise that you are holding up British interests in doing business in your country; you say you want it"-and this, that and the other. There are opportunities to keep hammering away and we hope to slow the flow of contradictory and harmful currents.

Q85 Mike Gapes: What about British companies co-operating in partnership with Brazilian companies as a best way to deal with the problem?

Nicholas Armour: If that is what the business decides is the best way to deal with it, fantastic. Partnerships tend to work better in life.

Q86 Mike Gapes: One of our witnesses said that that was the way forward. Do you encourage that?

Nicholas Armour: Yes, absolutely. Part of UKTI’s services is to help companies to find suitable trade partners.

Q87 Sir Menzies Campbell: I wanted to ask about the opportunities provided by the Olympic Games and the World Cup, but to a large extent you have answered me, given your emphasis on infrastructure.

Nicholas Armour: I have a huge list of things that I could read out if you want.

Q88 Sir Menzies Campbell: They are quite good at building stadiums, though. I think that Brazil has the largest football stadium in the world. I suppose that we have a good advertisement-a good shop window-because our infrastructure is specifically designed for the games rather than transport or other things, and it has been built on time and within budget. Is there any sense that we are trying to sell to the Brazilian Olympic authorities the expertise that went behind it?

Nicholas Armour: Very definitely. We have various host-to-host agreements, and that seems to be the format that we had with the British Columbia government for the Vancouver Winter Olympics, with the Russians for the Sochi Winter Olympics and with the Brazilians for the Rio Olympics and so on.

We are also trying out a new sort of project-focused approach in Brazil. There is a laissez-faire attitude in the British approach to business; everybody piles in and sees what business they can gain. This time round, we are trying to be a little more organised, particularly in the way that companies call on our services in-country. They say to themselves, "Hey, hang on a bit. There is a mission being organised, by whomever, the month after next. Why not be part of that?" It is about looking at specific things. We do not think that "come tomorrow without any preparation" is a good idea. We are trying to give that sort of steer to companies looking to win business so that it becomes more coherent. We are moderately confident. The Brazilians tell us that they would much prefer that approach, rather than a whole host of people all trying to call on a few key officials in an unstructured way.

In particular, we are also looking at ways for what we call the technocratic element, where we want to strengthen the UK’s positioning in offering things by offering direct knowledge transfer. We have already started doing that on the whole question of the sustainability agenda around the London games. Our organisers are talking to their organisers, and their head, Henrique Meirelles, is coming in a couple of months to see what more they can learn from that. It is collaborating selling. The technocratic experience of "We know what we’re doing, this is how you did it, and these are the companies who did it for us and can do it for you" tries to bring all that together in a whole-I did not want to use the word "holistic", but I may have to-sort of way.

Q89 Sir Menzies Campbell: In that regard, are you satisfied with the co-operation that you are getting from the Olympic authorities in this country?

Nicholas Armour: Yes is the short answer. We can all be better human beings and can always have better co-operation, but, given that they are trying to run the Olympics in just over a year’s time, they understand the importance of that and it is a collaboration that works.

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

Nicholas Armour: I am sure that we could find some figures that we could send to you.5 How reliable they would be, I don’t know. Companies will come to us and will want their hands held right up to the altar and when the ring is put on the finger. Others will need, "There’s a church and there’s a good verger to talk to," and they then say, "Thank you very much," and that is the last we hear from them until we see in the equivalent of Hello! magazine that it has been a successful marriage. There is a whole range of ways in which one gets involved, so to get the actual figures would be difficult.

This is Tony’s patch, so I will let him say something in a moment, but what I would say is that, around the project approach we are taking to the Olympics, smaller companies that have been supplying into the Olympics here really need, probably, to look at going with the sorts of people whom they were working with here and go with them working in Brazil. That sort of thing will open the wider door and then the smaller SMEs will come in as part of, I suppose, the supply chain.

Tony Lamb: It does not quite answer the question, but in the period between 2006 and 2009, we saw a 500% increase in the number of inquiries being fielded by our colleagues in the UKTI network in Brazil. In many respects, they would have led to some relationships. It underlines the attention that is now being focused on Brazil by companies-large ones and SMEs-here in the UK.

Q91 Mr Watts: Could you send us any details that you have? If you are saying that it is a priority and that it is something that needs to be attended to, it would be nice to have some information to give us an indication of whether the numbers increasing tell us that you are being successful or whether there needs to be a bit more of a push in some areas.

Tony Lamb: Sure.

Q92 Andrew Rosindell: Obviously, Brazil is a great opportunity for British business to trade and to work with in the future, but, of course, British business needs to have opportunities that do not pose complications. Therefore, businesses need an easy way in and they do not want to be bound up in bureaucracy and regulations that prevent business from flourishing. They also need Governments who are co-operative, as well as security of investment. What are we doing to encourage the Brazilian government to get their act together and ensure that British business feels confident to invest in Brazil? If we cannot do that and are not succeeding in that way, how are we helping British business to get around some of these issues?

Nicholas Armour: Let me clarify one point. I am not working hard to encourage British companies to invest in Brazil. I am delighted that they do so if it is part of making them a healthy company, and of course the Government will work terribly hard to protect investments that have been made. What I want the Brazilians to do is to buy the products of British companies, preferably at a profit for those British companies. Of course, we are trying to attract inward investment, too. I fully accept that as part of selling you will need to set up partnerships and local manufacturing, but my aim is to make British companies as profitable as possible by selling fine British products, goods and services.

As you identified, there are a number of issues, particularly in Brazil. The formal process for dealing with the Brazilians on that is through the Joint Economic & Trade Committee, which has met once a year since 2007. Dr Cable went over at the end of August last year with a delegation. We are expecting the Brazilian Development, Industry and Foreign Trade Minister to come back in early September. The mechanisms that we have are the major trade agreements, which Philip has touched on. If it is a trade policy issue, we have the pressure that we can put on the Brazilians to address market access concerns that companies raise with us through the EU and our bilateral mechanisms. We are also willing to offer advice to individual companies and to support them as necessary and as appropriate in lobbying on specific issues that they may have. As part of the Foreign Office’s Prosperity agenda, we are looking at a wider way of helping the Brazilians to build up their capabilities and capacity in running efficient and effective customs regulatory regimes and the like, which will make Brazil an easier country and marketplace with which to deal. By definition, that will make it easier for UK companies. Does that answer your question?

Q93 Andrew Rosindell: It does. Tell me how you feel about Brazil as a country. Is it a safe place to do business with, not only in terms of the stability of the country-it is a stable country-but in terms of corruption? There is a degree of corruption in the country still. How are we helping and advising British businesses in that sense?

Nicholas Armour: I will take the macro bit to start and I hope that the others will join, if they want to. The last presidential election was the first for a long time where whoever won the election was not going to lead to a huge dip or rise in the economy. To that extent, Brazil, which always had a fantastic future, has finally reached that future. The economic and political stability seems to be there.

Corruption is a difficult issue. It affects a large number of markets in which our companies do successful business. We hope that they manage to stay the right side of the Bribery Act. Those who deal with countries where there is a reputation for corruption need to tread warily. We are happy, as part of UKTI trade services and with the FCO’s general advice, to discuss with companies what that may mean in their particular circumstances. There is an Overseas Security Information for Business website, which gives access to the sorts of issues that companies might face, not only on the bribery and corruption side, but on the security side more generally as well. Those are the things that businesses need to be aware of before they embark. That is the service we offer on the web. It is a difficult issue.

Q94 Chair: Thank you all very much. I am afraid we have to move on. Thank you for the efforts you are making on behalf of Great Britain.

Nicholas Armour: Not at all. Let’s just hope that British companies make the best of it, because that is the satisfaction in the job. I hope that you find your visit useful and that it adds to the access British companies will get.

Chair: We are much looking forward to it. Thank you for coming along and briefing us on what is going on.


Examination of Witnesses

Witnesses: Professor Andrew Hurrell, Montague Burton Professor of International Relations, University of Oxford, and Dr Marieke Riethof, Lecturer in Latin American Politics, Institute of Latin American Studies, University of Liverpool, gave evidence.

Chair: The second part of this session is about Brazil on the international stage. I am delighted to welcome Professor Andrew Hurrell from Balliol College, Oxford, and Dr Marieke Riethof from the University of Liverpool. Have I pronounced that right?

Dr Riethof: Yes.

Q95 Chair: A warm welcome to you both. Apparently the witnesses had not met each other until today, so it is not a co-ordinated response.

Let me open the bowling by asking, how important a player is Brazil on the world stage? Is it becoming increasingly influential?

Dr Riethof: Brazil is a growing and booming economy, as was discussed in the previous session, so I will not elaborate too much on that. Apart from the economic importance of Brazil, it is also a regional and international player. Regionally, it is strengthening relations with neighbouring countries and promoting regional integration, not just economically but politically. It uses that regional integration to promote its own global role.

Globally, Brazil’s economic importance is crucial, but it is trying in various other ways to establish its international reputation. In part, that happens through Brazil’s focus on multilateralism. It prefers to conduct global policies through multilateral organisations like the UN. It also has an extensive range of relations-formal and informal-with countries around the world. In that sense, Brazil’s foreign policy is focused on establishing and strengthening South-South relations in various regions. It is building on relations with developed countries-the US, European countries and Japan-while strengthening its regional importance, using that together with its global role to promote its international foreign policies.

Professor Hurrell: I would add a few points about how we have come to see Brazil. For some people, Brazil has come out, not of nowhere, but has emerged very suddenly. There are a number of aspects to that. A previous witness talked about Brazil as a country closed unto itself. There has been a long tradition of Brazil being quite inwardly focused and tied to a foreign policy that has traditionally been quite low-key, reticent and pragmatic. The move into the years of President Lula-this very activist, personalist, voluntarist and ambitious foreign policy-is a dramatic move, and it affects how we see Brazil, perhaps underplaying, for example, the extent to which Brazilian activism had been growing. In the 1990s, it was developing as a major player in, say, the dispute settlement mechanism of the WTO. That is one side.

Secondly, there has been huge ignorance about Brazil in many places-the United States as well as Europe. If it does not come from nowhere, it comes against a backdrop of patchy knowledge of Brazil. An earlier witness talked about making Brazil fashionable. Brazil has become much more fashionable in culture, media and music, but in terms of knowledge, media presence and exposure, and academic time and attention, there is much less certainty. The last area studies rethink in UK higher education left out Latin America. Within Latin America, there is always a question about where Brazil fits. So we have a big problem in terms of what we know and the number of people who have a knowledge about Brazil.

Those are the points I would make about where we have come from. Obviously, there are the areas we have just heard about-those areas where Brazil has now come on to the stage as a very dynamic player. It is active, and in many areas it is what one might call a veto player; things cannot happen without it. Real questions regarding where it is going and how much it has achieved are very live issues.

Q96 Chair: Their approach on the world stage has been to economically act right, but to talk left on the international stage in order to satisfy the nationalistic base. Do you think that sort of approach will continue? Where do you think they will be 10 to 15 years from now?

Professor Hurrell: Brazil has been going through a period in which many things have been very positive. There has been a very benign external environment. Economically, there was the rise of China, lots of credit pouring out of the United States, and countries through the early 2000s buying Brazilian manufactured goods. Politically, Brazil could exploit a world in which, looking around at, say, the WTO, many people thought, "We can’t really run this any more. It’s just a rich man’s club. We need more players coming in." Brazil was able to play upon that perceived need for more participation and legitimacy.

It has been a benign environment for the region. The United States has not really been engaged. There has been a space. We could talk more about the back yard question, but over the recent period there has clearly been, if you like, room for Brazil. So we have been through a period where many things have gone well. Economically, the great political success of the Lula years, to which I think your question directly alludes, was being able to combine macro-economic orthodoxy-in a sense, a continuation of many of the themes of liberalisation-with, first, social programmes to broaden the political base, and then, more recently, a re-engagement with aspects of a more statist, nationalist economic policy. It is that blend which has, externally, enabled Brazil to talk to Davos and the World Economic Forum, but also to the World Social Forum in Porto Alegre. Those two sides have gone together. One of the things we need to think about, going forward, is whether many aspects of that benign environment, and that great success in combining different aspects domestically, is going to meet greater challenges.

Dr Riethof: To elaborate on the point you mentioned about the role of the US in the region and what it means for Brazilian foreign policy, I would stress that Brazil likes to conduct autonomous foreign policy as much as possible. It likes independence, or not necessarily being dominated by the US. That is a driving force in the regional context and internationally. But that does not necessarily mean that there are not positive relations between the US and Brazil, which we can discuss further.

I also want to stress that there is not necessarily a contradiction between Brazil’s state-led development policies, its progressive social policies and its position on the international stage. There is a combination between promoting free trade and the market economy, and promoting the other policies.

Q97 Chair: Do you think we need to adapt our approach to the rise of Brazil as a major global power, or are we on the right track?

Professor Hurrell: It’s not so much a matter of the "right track"; I think it’s a matter of reading where we think we are, and there are numerous "we’s" involved in that. In the 1990s it seemed very clear: there was a coherent, developed, successful West led by the United States. Many of the prescriptions, political and economic, seemed very clear. So it was a matter of bringing emerging powers from countries like Brazil on board, socialising them and integrating them. What we have to get used to is a changing world in a more dramatic way, because the notion that the West has the answers, that its institutions work, which was already eroding, has come under much more sustained challenge through the financial crisis and a whole series of other factors.

I think the big change is getting used to a world in which these are new partners. They are there round the table. It is not clear that anybody has a capacity to dictate who is at the table, or what the conditions are. That is one of the messages of the G20. So there is a very different kind of relationship-who sets the agenda? We see that in terms of debates about the agenda and about responsibility-who is being a responsible great power? With the United States there is the idea of being responsible stakeholders, growing out of relations with China. I was in New York all last year and heard lots of language accusing Brazil, such as, "Brazil is an adolescent, it hasn’t really learned to grow up, it’s got power but it doesn’t know how to use it."

Of course, the response on the Brazilian side is, "Well, but what is responsibility? Climate change-you’re still the great irresponsible." So there is this debate, and it’s getting used to navigating in that world, rather than in a world in which there is a potentially simple process of entry, that I think is the biggest challenge.

Q98 Sir Menzies Campbell: To some extent you have anticipated and answered my question. Status equals influence, but this carries with it responsibility. Do you detect any political change within Brazil which understands that? Has the change in the presidency had any impact upon that idea? I know that there will be some specific questions about international institutions and the Security Council. Without delving into too much detail at the moment, do you detect any understanding that if you play a more important part in international institutions, you are expected not just to use your influence but to demonstrate your responsibility?

Dr Riethof: First, on the possibility of change in Brazil with the new presidency, I would say that there is a lot of continuity between President Lula and President Dilma Rousseff, so there is continuity in the foreign affairs team. There is also continuity of priorities, in developing the global role of Brazil through multilateral institutions and also through Brazil’s economic and unitarian role in the world, and continuing to develop and strengthen relations with neighbouring countries. There are a few small differences. First, President Dilma Rousseff seems less likely to take very controversial stances in international politics than President Lula. She also seems to emphasise human rights a lot more. That is from the first five months of her presidency.

Q99 Chair: Do you believe her on human rights?

Dr Riethof: There is always a mix of symbolic policy and real policy. In her case, there is a personal motivation to support human rights.

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

Human rights is another very interesting one. There was a tendency to play what one might call hardball with human rights through some of the Lula years-a justifiable critique: "You’re selective", "You’re messing around with the human rights regime", "We’re rising", and those sorts of ideas, and then clearly a pull-back, whether it was instrumental or more than just, that, "Yes, there are certain principles, we are a democracy, we want to be a liberal country and we recognise that these are important norms."

Q100 Rory Stewart: We can see a curious picture of Brazilian action in foreign affairs. There sometimes may be inaction in relation to countries such as Pakistan and Afghanistan, sometimes unhelpful political action in relation to Cuba or Venezuela and sometimes eccentric action in relation to Iran, but is there any coherent, original philosophy behind that? Is there a Brazilian narrative that they are presenting? Is there an intellectual or cultural energy saying, "This is Brazil’s vision of the world order"?

Professor Hurrell: I’m a little bit of a sceptic about giving too much attention to any country’s grand strategies, but it is possible to identify a set of understandings about the world. For many of those associated with Brazilian foreign policy, the reason why they are confident that they have some of these things right is that they have been more right than wrong about how power is defusing and about the role of emerging countries and the need to reorientate themselves to that. They see themselves as being right in terms of the centrality of what we used to call north-south relations. There is a south-south policy, which obviously has self-interested, instrumental goals, but also has a set of normative moral claims. After all, President Lula has pressed arguments about hunger, money, transfer taxes and raising resources, so there is a clear narrative there, which is about interests and values.

Even in some of the, what you term, "controversial" policies-the idea that Brazil, and we may talk more about the region, has a role in helping to manage and mitigate some of the more obvious deep-rooted regional problems that everyone recognises and some of the problems that others, particularly the US, recognise, say in relation to Cuba and Venezuela-its policy is clearly seen as part of a narrative about what Brazil can do. That is not about the great, grand provisions of some new global order, but important provisions of active diplomacy and responsibility in its region. There is a narrative, but how much one can fit everything into a single grand strategy for any country is a slightly open question.

Q101 Mr Roy: We know that Brazil has signed treaties and that the Brazilian constitution states that nuclear activity is for peaceful means only. What are your thoughts in relation to whether Brazil will want to have or have a nuclear weapon? I would also like your thoughts on Brazil’s role in relation to non-proliferation and its role in that debate.

Professor Hurrell: Again, it is an area of change. Just to be very quick, Brazil’s interest in nuclear policy goes right back to the ’50s. This was a phase that led through to 1975 and the West German-Brazil agreement, which was the largest transfer of nuclear technology ever to a developing country. That did not work out hugely well, both scientifically and technologically and in incurring bad relations with the US. From the late ’70s to the late ’80s there was the so-called "parallel nuclear programme" developing indigenous enrichment technology.

The following decade was one in which Brazil was very much in favour of joining international regimes. That is the decade of the process that led to Brazil’s adhesion to the non-proliferation treaty in 1998-the coming onboard. There is a change-a discernable change-in tone, in the sense that by the time we get to maybe 2004 or so, there is a return to a view that the control of our own indigenous nuclear technology, and particularly the enrichment technology that Brazil had developed and wants to develop on an industrial scale for exclusively peaceful purposes, is an important part of our national project. I think that that is very clear. The dominant, overwhelming theme of Government policy has been not only that it is for those purposes, but that Brazil clearly upholds external safeguards in what it does. There are issues with centrifuges in energy plants, and there are ongoing issues with Brazil’s reluctance to agree to the Additional Protocol, or anything like it. Yes, there have been statements by people in Brazil-sometimes official, sometimes semi-official-stating that Brazil shouldn’t have signed the NPT6 and that it should maintain a control of nuclear technology such that, in the future, it would give rise to different sorts of options. That language has grown up, but it is very much outside of official policy.

For me, characterising what we have seen in the nuclear area, there is very much a re-emergence within the so-called "nuclear renaissance", which may be ending now with Japan, of the idea of "our technology, our development for our economic purposes, industrial purposes, commercial purposes and energy purposes". That is the thrust of where Brazil has been going.

Q102 Mr Roy: So the bottom line is no nuclear weapons?

Professor Hurrell: It has always been very hard to imagine what would be the real driver. There is a great debate about what drives states to acquire nuclear weapons. In the 1970s there was a latent nuclear rivalry with Argentina, not at the weaponisation level, but at the level of development. One of the great achievements of regional security in Latin America was the rapprochement and the stabilising of that relationship, which is still a stable security relationship.

So what do we have? We have a potential that that relationship might unravel. Some of the Brazilian language is making Argentina think a little more cautiously about the future, but there is still nothing that really represents a threat of unravelling. We have status drivers, and surely the focus on technology such as nuclear-propelled submarines has both a defence rationale and a status rationale.

More broadly, Brazil wants to be a player in a reformed nuclear order. But it is very difficult to see what might be the direct pressures,7 which one can see in other parts of the world, that could come back to push Brazil in that direction.

Q103 Mike Gapes: May I take you a step further on that? Would you say that what has been characterised by some people as a cosying up between Lula and Ahmadinejad was a personal initiative of Lula’s? Or does it reflect the deep-seated view that countries have a right to enrich uranium and to have a national policy, 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 not signing additional protocols are, "It is an intrusion, and we are not developing nuclear weapons," and so on. Do you think that Lula really believed that?

Professor Hurrell: I don’t know, and we don’t know. The motivations may be in the archives and, in however many years, we will know more about the individual motivations. Interestingly, of course, Lula’s policy generated this enormous debate and controversy inside Brazil about whether it was a good thing or a bad thing-relations with Washington, human rights, and all of that.

There was, above and beyond the specifics of Lula, a sense of a nuclear regime that, for many people, had been used selectively to reflect particular countries’ interests, but there is a right of indigenous enrichment and of legal indigenous technology. Those are quite broadly shared views of "the nuclear order". There is a view in Brazil, including within parts of the military, that Brazil had been a good player in the 1990s. It signed the NPT.

What happens? Look at India. India is a player that plays hardball with the nuclear order and gets rewarded. So you have that view, which, again, is not the official Government view. Those ideas are there and will stay there, over and above the debates about whether the engagement with Lula was a good or bad thing for Brazil and for the world-normatively or whatever it might be.

Q104 Mike Gapes: Can I switch the focus? You have both referred to the fact that Brazil sees itself as a growing important player in the world. At the moment, it is a non-permanent member of the Security Council. As such, it did not vote the same way as the other non-permanent member, South Africa, on UN Resolution 1973 with regard to Libya, but in abstaining it voted the same way as India. Where in this spectrum does Brazil stand? Is it emotionally and intellectually with the traditionalist, non-interventionist view on foreign policy, or did it just feel that it could not support intervention at this stage?

Dr Riethof: It is more of an expression of Brazil’s traditional rejection of intervention along the lines that were proposed in the resolution. Brazil does support humanitarian missions in other fields, so I don’t think it’s necessarily a case of Brazil seeing it as its future role to support these kind of interventions. Brazil is probably likely to be more in the non-interventionist camp, in that sense.

Q105 Mike Gapes: Does it see this as being an impediment to its taking on a leading role globally in global security, or does it think that it still wants to be a permanent member of the Security Council and so change the way that the world is shaped?

Dr Riethof: Brazil sees its role as more in mediation in international conflicts than in intervention, although whether that is always realistic is a different question. Going back to the Brazil-Iran situation, that was an attempt by Brazil to prove that it was capable of mediating and negotiating a major international conflict, where it would not be necessary for the Security Council to impose sanctions.

Q106 Mike Gapes: What about the aspiration to be a permanent member of the Security Council? Is that widely supported in the country? Do people recognise that it brings great obligations as well as status? Would Brazilian society generally, and the Brazilian polity, be prepared to accept the responsibilities that come with being a permanent member?

Dr Riethof: Support for a major Brazilian role domestically is very considerable, so the international reputation of Brazil and foreign policy is a major domestic policy issue in presidential campaigns. Of course, as you say, that kind of role in the Security Council would require investment and potentially also participation in sanctions. If we look at the regional context, Brazil is involved in conflict mediation through the regional structure of the Union of South American Nations, but I am not entirely sure whether that translates into a recognition of the responsibilities in the Security Council.

Professor Hurrell: The aspiration is a very, very long-standing one. There were debates over Brazil leaving the League of Nations in 1926 and debates in the 1940s when Brazil was on Roosevelt’s possible active list as a permanent member. How much of a direct priority it is for Brazil has gone up and down, and it has come back clearly in recent years as a very major priority. Obviously, as you say, Brazil is towards the sovereignty end of the spectrum, although there has been quite a lot of movement towards ideas not of non-intervention but of non-indifference about what happens,8 so there has been movement there. There is a big debate, though, about what the responsibility of a permanent member actually involves. It clearly involves activities in peace and security, which is part and parcel of how Brazil has seen its major role in Haiti.

Does it always necessarily involve enforcement? Yes, perhaps, but there is another argument that says that the role of a broader membership could well be in providing other assets of this mediation kind and other important assets in terms of representation. So I think the Brazilian view would be to press a broader debate about what "the responsibilities" of permanent membership are, but-you are right to suggest-with a creeping recognition that there are points where, if you like, the rubber hits the road and hard decisions have to be taken.

Is there broad support? Yes, there is much more interest in foreign policy domestically. There is much more support for an active foreign policy. There is much more domestic contestation about things like Brazil’s Iranian policy. Would that translate into a high-risk foreign policy in terms of active interventionist policies? I think we have still got quite a long way to go there.

Q107 Mike Gapes: What attitude should the UK have to Brazil’s aspiration to be a permanent member of the Security Council? The British Government support Brazil’s bid, along with several others, but that is always in the context of a complete reform of the Security Council, which is not going to happen. Do you think that we should just be saying, "Put Brazil on now, along with India and a few others"? Or should we wait for a complete reshaping of the Security Council?

Dr Riethof: Given that reform of the Security Council is a longer-term prospect, maybe. I would say that an active role could be to recognise Brazil’s various foreign policy roles and various formats and regions and to use that also to support a Brazilian role at a global level, even if that does not immediately translate into a permanent seat at the Security Council. As you probably know, US support for Brazil as a permanent member has not been expressed openly, and China is apparently also not necessarily supporting a Brazilian bid, so some support may be useful for a Brazilian campaign in that direction.

Q108 Mr Watts: Can I just push you on Mike Gapes’ earlier point? Would Brazil rule out intervention, or would it accept intervention as part of permanent membership? If, in theory, it would not want to endorse any sort of intervention under any circumstances, does it see itself as a moderating force to add something different than exists at the present time? What is the motivation for them?

Professor Hurrell: One needs to unpack a little bit the idea of intervention, because, as I said and as you have heard, certainly within the region, the movement towards a notion of non-indifference and the idea that problems and issues often very, very deeply embedded in other societies require an international response, in which Brazil has been willing to be active-whether that is crises in Bolivia or problematic relations between Colombia and Venezuela-is quite a significant movement. It is different from forcible coercive intervention, but it is still quite an important movement in terms of understanding where the country has come from and where it might go.

Even in the Libya case, not just in relation to Brazil but more generally, there were differences between the two resolutions. The first resolution actually brings emerging powers along, mentioning the Responsibility to Protect and mentioning the ICC,9 which, for a country like India, is a big thing to happen. It is different and distinct from the second resolution, which was seen to be far too open-ended in terms of the scope it might give to intervention. Seen in that way, it is not a black and white story in which Brazil and other emerging countries are locked into this absolutist non-intervention position. There has been movement. The question is about the terms of that movement and the terms of intervention. That brings us back to the other question, "If you were a more permanent member and achieved your goal, would that be sufficient to shift your policy further and more dramatically still?" I would be quite hesitant in suggesting that there is anything like an automatic relationship between those two things.

Q109 Sir Menzies Campbell: One of the forms of permanent membership that is on the table is permanent membership without a veto. Would Brazil regard that as being second-rate? When you answer that, perhaps you could refer back to your analysis of the kind of foreign policy that Brazil might be expected to follow. It seems to me that you could follow that non-interventionist policy-let me call it that for shorthand reasons-perfectly well without a veto. But how would Brazil regard that kind of division of responsibility within the Security Council for permanent members?

Dr Riethof: I have to say that I am not entirely sure what Brazil’s view is on that issue.

Professor Hurrell: You would have to inquire more directly of those who are following the specifics of the negotiations. I guess that it would depend on what the overall package of a reform looked like. For example, if it was a large reform with a large council, would there still be a hierarchy from which Brazil would feel excluded? It is quite difficult to answer the specific non-veto question without knowing what the package would be, which that non-veto question would be a part of.

Q110 Sir Menzies Campbell: Perhaps that’s something that should be explored on the Committee’s visit.

May I ask you a few questions about the BRIC countries? First of all, it is not a formal grouping. Nevertheless, do you think that that informal grouping has any influence upon Brazilian foreign policy? Does Brazil look round at the other BRIC countries and try to be equivalent to them in its approach?

Professor Hurrell: I am not sure about looking round at them. In a sense, the BRICs grouping was invented out of the whole notion of emerging markets, by Goldman Sachs and so on. There are any number of people who will tell you why the BRICs make no sense as a grouping. For example, what is Russia doing in there, as it is a declining power? And so on. There are all the differences and contradictions between the foreign policies and world views of these countries. All of those things are true and yet the extraordinary thing about BRICs is that it has acquired a kind of diplomatic reality. There are BRICs summits and I understand, as an academic outsider, that in a number of other groupings, such as the G20, the BRICs framework for co-ordinating and discussing policy seems to have taken on a certain kind of reality.

So my view is that, yes, all of the obvious problems are there and BRICs are not going to be the definitive alliance that will change and structure the world, but we are not really in the business of very clear alliances. We are in a much more fluid and flexible situation and lots of new groupings are emerging. Their exact status is unclear, but of those groupings, it is quite plausible that the BRICs grouping has quite a lot of life left in it yet, particularly since we are in the process of beginning to rethink some of the institutional structures of global governance. My bottom line is that, despite everything, there is slightly more there with BRICs than one might have expected.

Q111 Sir Menzies Campbell: Would Brazil think that it enjoyed considerable influence within that grouping?

Professor Hurrell: If you look at all the indices, many articles in the Financial Times and elsewhere were asking, "what is Brazil doing there"? It really should not be there, it is in such a different rank in terms of power. We have China, and India, even, which are in material power terms, many times more important.

Q112 Sir Menzies Campbell: All nuclear powers, in the case of Russia, China and India. All possessing nuclear weapons.

Professor Hurrell: Yes, exactly. So what is Brazil doing there? Well, we can have that debate and we might argue that other kinds of power resources are very important. Brazil has a number of assets that give it an important place in terms of how we think about global governance-in the environment and so on-but from Brazil’s side, as we have already said, the dependence, the centrality of a kind of activist, multilateral, small-group diplomacy is very clear. This is the road that says: if you can’t build it on the back of your own national power, you have to build it on the back of what one former Brazilian diplomat called "diplomatic GNP" and the BRICs are clearly part of what you might call diplomatic GNP.

Q113 Sir Menzies Campbell: That is the basis for your illustration of their role at the G20?

Professor Hurrell: Yes.

Q114 Mr Roy: Taking you on to the issue of aid to Africa, should the United Kingdom Government be concerned about the level of aid that Brazil now puts into Africa and its growing stature there?

Dr Riethof: Aid from Brazil to Africa is growing fast, but still, on a global level, overall Brazilian government expenditure is a relatively minor amount of money. However, there is very clearly growing aid and also growing investment in trade with Africa. For Brazil, this is partly to promote its economic interests in the region, so Brazil is a major exporter of manufactured goods to Africa and Africa exports commodities and natural resources to Brazil. The African relationship that developed under President Lula was focused partly on developing those interests, developing investments from Brazilian companies, and also on developing diplomatic relations, developing support for the Brazilian role globally and for Brazilian permanent membership of the Security Council. Whether this is something to be concerned about is a question of scale, because the Brazilian effort there, as well as being small, focuses on aid, and very much on social programmes and agricultural development. It also focuses on the Portuguese-speaking countries, the traditional partners of Brazil in west Africa. I would say that it is relatively minor, but a major part of Brazilian foreign policy in developing its international, global role.

Q115 Mr Roy: But is it a way of buying support and influence? Also, based on that, is there a danger over its relationship with China, which seems to be doing a very similar type of exercise in that area of the world? Is there a danger that those relationships could be affected?

Professor Hurrell: I don’t see that. It seems to me a very different kind of case from the concerns that emerge over China, in terms of strategic competition or undermining notions of what aid is about. I have not followed and participated at all in the official side of UK-Brazilian relations, but it has always seemed to me that the relationship over policies towards Africa is actually-I was going to say easy, but that is not quite the right word-a good and productive one, because the policies of the two countries run in broad parallel. Yes, Brazil has a particular focus on the nature of its social programmes. It makes claims about its own experience, and there are different places in terms of Portuguese Africa, but in broad terms it seems to me that when people are putting together agendas for UK-Brazil, action and aid in Africa is an area where there are clearly many things that could be done together on the ground, and perhaps also in thinking about what the aid regime more generally will look like in years to come. I see it as very different in character from somewhere like China, but perhaps I have missed something.

Dr Riethof: It may be a small point, but it seems from the evidence that Brazilian aid to Africa tends to be much less controversial than Chinese investment and aid in Africa.

Q116 Andrew Rosindell: In terms of relations between Britain and Brazil, and in terms of Brazilian relations with its near neighbours, we have the issue of the Falkland Islands. What is the likelihood of Brazil helping to heal the rift between Argentina and Britain, and perhaps acting as a mediator? Is there a possibility of that?

Secondly, if that is not a possibility, are we reading the signs correctly that perhaps the hostility towards Britain from Brazil is growing? We have seen one or two recent events that have indicated that. Is there a chance that Brazil will help, or continue to support Argentina’s claims?

Dr Riethof: To start with the second question, I think we need to see the Brazilian action in January in a regional context. It was agreed in November 2010 at a Union of South American Nations summit that certain actions would be taken regionally, and that has been promoted by Argentina for the last few years in a regional context. That also fits with Brazil’s agenda of stressing national sovereignty and national self-determination. But I don’t necessarily think Brazil is actually moving towards stronger support for Argentina’s claim over the Falkland Islands. Whether Brazil will play a mediating role in the Falklands is an interesting question to explore. Of course, Brazil has economic interests in the region, and it has economic interests in Argentina, so that might be a way to mediate.

Q117 Andrew Rosindell: Do you feel that Brazil’s position is purely because it is part of that region of the world, and it feels that it had better stick with its neighbours and back up Argentina, or does it genuinely support Argentina’s claim over the Falklands?

Dr Riethof: I hesitate to say whether it does or doesn’t support Argentina’s claim, but I think the incident in January needs to be seen in the context of the Brazilian President visiting Argentina for trade relations, so there is also an element of political context that needs to be considered.

Professor Hurrell: I would underscore the regional picture, and how it has changed. We mentioned a little while ago the background of Argentina-Brazilian rivalry. Relations were bad in the 1970s. They began to improve in the late ’70s, and improved substantially between Brazil and Argentina through the 1980s. When we look at a map, we think that Brazil is and always has been part of Latin America, but historically that is not really accurate. Brazil has seen itself as different and distinctive from the rest of Latin America. The first visit by a Brazilian president to Colombia was not until 1981. Brazil has been very separate, so the move to the region, and the importance of the region in Brazilian foreign policy, is something we can trace. It has become a central part of Brazilian foreign policy, so not doing anything that would be dramatically out of step with the region, or that would interfere with its regional policy, seems to be something on which one can bank quite heavily as a major factor that influences what Brazil does and doesn’t do in relation to the Falklands/Malvinas.

Q118 Chair: To go back to the USA, what is Brazil’s relationship like with the States and do you think we will ever be in a position where we in the UK have to choose between Brazil and the USA?

Professor Hurrell: I doubt it.

Chair: Good.

Professor Hurrell: Many people look at the broad history and think of the United States as being so obviously the completely dominant country over its back yard, and that everything that any country in South America does is exclusively and heavily focused on the United States. What is interesting about Brazil and the United States is that as we move into the post Second World War period, the periods of very close relations have been few and far between. The dominant picture has been of relative distance. What is interesting about the more recent years is that that has not actually changed. As the United States has become very preoccupied, post 9/11, with other parts of the world, relations, say between the Lula Government and the Bush Administration, were cordial, but there was not a lot of substance.

There are clear signs from the Brazilian government that they would like to have more cordial and more open relations with the United States. There are signs, as part of the United States coming to terms with strategic, emerging partners, of a new focus on Brazil. Yet what is quite striking is the difficulty of giving much meat and substance to that agenda. It is a crude comparison, but if you compare the nature of, say, the US-Indian relationship, there is nothing comparable and nor is there likely to be. Of course the United States is a major player for Brazil, but Brazil, as the discourse and the rhetoric has it, sees itself as a global player and only sees the United States as one part in the bigger range of its relationships. On that basis, it is hard to imagine a situation where that kind of question would emerge.

Dr Riethof: Although there have been quite a few disputes and disagreements over the last few years between Brazil and the US in political fields and also in the economic area, relations are generally co-operative and they should be seen within the general foreign policy objectives of Brazil, including the Brazilian aim to keep support among the great powers-the members of the Security Council-for its bid for a permanent seat. It is quite a complex relationship; it is not a formal alliance, and I think there will always be certain areas of disagreement. One of the more prominent ones is the area of trade relations.

Q119 Chair: We have completed our questions. Have we asked you all the right questions? Is there any point you would like to summarise or are we there?

Professor Hurrell: We have covered the UN and we have talked about nuclear. I would always include climate change and the environment as well because if we are thinking about why Brazil matters-

Chair: We covered that with other witnesses.

Professor Hurrell: I am sure you have, but on the global issue side that is really important. Obviously, I presume you are pursuing the domestic side of the question of sustainability, or at least the challenges, on the domestic side, as discussed in the earlier session this afternoon. This is a necessary counterpart to Brazil being able to do the sort of things we have been talking about on the international side.

Chair: Thank you both very much indeed. It is really appreciated. We are going off there in three or four weeks’ time and it is very helpful to have this sort of briefing before we go.


[1] Brazil, Russia, India and China

[2] Joint E conomic and Trade Committee

[3] Brazilian Development Bank

[4] World Trade Organization

[5] Note by witness: SME figures, during the period 01/04/2010 and 31/03/2011: 790 companies were offered Service Deliveries by post. The companies cover a range of sectors, notably Healthcare & Medical, Global Sports Projects, Oil & Gas, Education & Training and Construction.

[6] Nuclear Non-Proliferation Treaty

[7] Note by witness: t hat is, direct pressures to acquire nuclear weapons of the kind that one can see in other parts of the world.

[8] Note by witness: inside other countries .

[9] International Chamber of Commerce

Prepared 28th June 2011