House of Commons - Trade and Industry

Select Committee on Trade and Industry Seventh Report

5 ARGENTINA, PARAGUAY, URUGUAY & VENEZUELA

139. We have concentrated on Brazil as the largest member of Mercosur, but we have seen evidence of significant opportunities for UK companies in the bloc's other members, most notably Argentina, but also Uruguay. We received little evidence on Paraguay and, as new member Venezuela is in a transition period, we have therefore focused on Argentina and Uruguay.

Argentina

140. After Brazil, Argentina is Latin America's second largest country by area, with a population of around 38.7 million in 2005. Argentina has endured a boom and bust past, most recently a recession following 'contagion' from the 1998 Asian financial crisis, and then the 2001/02 financial crisis which saw high inflation, large government deficits, a loss of investment confidence, controls imposed on withdrawals of bank deposits, and social unrest, followed by the largest ever sovereign debt default in January 2002.

141. Since the default, the end of convertibility between the Argentine peso and the US dollar, and the subsequent devaluation, the exchange rate has stabilised, as has the economy generally. Argentina has recently seen strong economic growth, of 8.8% in 2003, 9.0% in 2004 and 9.2% in 2005, with forecasts of 7.0% in 2006 and 4.5% in 2007. After its past debt problems it decided to repay its International Monetary Fund debts of $10 billion in January 2006, although it still has World Bank and other debts.[345] Yet Argentina suffers from fears of an economic relapse, and it remains unclear whether it has escaped the boombust cycle, with inflation and energy being two key issues facing the economy.

TRADE RELATIONS WITH THE UK

142. After Mexico and Brazil, Argentina is the UK's third largest market in Latin America,[346] with UK exports now recovering from a dip caused by the 2002 economic crisis and subsequent Argentine devaluation. The UK's total goods exports to Argentina were valued at almost £169 million in 2005, and imports at £290 million. UKTI told us that in the first half of 2006 UK exports were valued at £106.8 million, compared to £81 million for the same period in 2005 (up 32%), while UK imports were valued at £170.4 million compared with £119.4 million (up 43%).

143. The UK is Argentina's 14^th largest trade partner: its 12^th largest source of imports, consisting primarily of machinery and transport equipment, chemicals and related products, and its 22^nd largest export market, mainly of food, live animals, beverages and tobacco.[347] The UK is also the top export destination for Argentine bottled wine. Among EU countries, in 2005 the UK was the 5^th largest goods exporter to Argentina after Spain (whose exports were valued at over three times as much as the UK), the Netherlands, Italy and Germany, and also the 5^th largest goods importer from Argentina after Germany, Italy, France and Spain.[348]

144. The UK has a long history of investment in Argentina, and UKTI told us that the UK is the 6^th largest inward investor, with over $2 billion invested over the past three years. The main sectors are pharmaceuticals (notably GlaxoSmithKline, and AstraZeneca), banking (HSBC), mining (Rio Tinto and Anglo Gold), and energy (BG Group, BP and Shell).[349]

OPPORTUNITY SECTORS

145. As with Brazil, Argentina offers opportunities while having significant barriers that must be overcome. As UKTI put it, despite a "difficult economic climate, Argentina continues to offer significant trade opportunities for UK companies."[350] According to the World Bank, Argentina is an easier place to do business than Brazil: 101^st compared with Brazil in 121^st position in 2006. In their evidence, Argentina's Investment Promotion Agency (ADI) outlined a number of reasons to invest in the country, including:

— its potential for strong economic growth;

— various investment incentives, particularly regarding duties on imports of capital goods and software industry tax incentives;

— its access to international markets;

— its competitive and qualified workforce, with high literacy levels and low labour costs;

— infrastructure and natural resource availability;

— its relatively low costs of investing; modern diversified industry; open economy with strong foreign investment;

— its favourable legal framework for foreign investment;

— and a good internal market.[351]

146. UKTI identified the most promising opportunities in the key Argentine export sectors as agriculture, mining, petrochemicals and the creative industries[352]—which it believes will be the main growth sectors in 2006/07, along with financial and legal services, oil and gas, and media sectors.[353] It considers there are further opportunities in pharmaceuticals, biotechnology and healthcare, as well as in banking, insurance, reinsurance, investment funds, capital markets, and PPP/PFI. The sixty-member British Argentine Chamber of Commerce (BACC) considered infrastructure, energy, transport, tourism and agribusiness as opportunity sectors.[354] The Lord Mayor also noted interest in PPP and carbon trading during his September 2005 visit.[355] A trade mission to Argentina led by the Law Society was due to take place in May 2007 to promote English legal services.[356] The CSA also noted that, like Brazil, Argentina has "a very good record in science and technology".[357] The Trade Minister identified ICT as a potential growth area, noting that a "number of companies have already established themselves in the marketplace".[358] During our visit we were also informed of Argentina's strength in ICT, with a number of large companies operating out of Buenos Aires and strong skills and range of languages available; UKTI noted that the sector was "fairly impressive", with software exports now outstripping wine exports.[359]

147. On science, the CSA told us that spending in Argentina did not match Brazilian levels, but said that, like Brazil, "Argentina ought to be high on our strategic considerations", in view of the potential for scientific collaborations between the UK and Argentina.[360] However, during out visit we found that the exchange rate has made study in the UK a difficult option for students from Argentina, and that the British Council's Chevening scholarships are widely sought after by students looking to study in the UK.

148. Unlike the case of Brazil, a bilateral Investment Promotion and Protection Agreement has been in force with Argentina since 1993, and the UK also has a double taxation agreement with Argentina.[361] The UK and Argentina also have a Memorandum of Understanding on financial rules and regulations, agreed in May 2001.[362]

BARRIERS & ISSUES

149. While there are opportunities in Argentina as outlined above, there are also a number of barriers to trade and investment, including taxes and tariffs, and difficulties over intellectual property rights protection and language, while economic risks are seen in terms of high inflation and energy security (explored in more detail below). Some companies suffered heavily due to Argentina's economic crisis, which is reflected in general perceptions of Argentina as a place in which to invest. Utility companies endured effective price freezes despite the end of peso-dollar convertibility and subsequent devaluation, which the CBI noted created real problems.[363] The banking sector was also hit by the crisis, with HSBC estimated to have lost over $1 billion.[364] UKTI also stated that a number of investors, including UK companies, mostly from privatized utility companies, have outstanding international arbitration claims against Argentina.[365]

Taxes & tariffs

150. The Lord Mayor told us that tax evasion was "endemic" in Argentina, with the system "skewed to those areas where collection is easiest", such as export tariffs which are levied at up to 23%.[366] Unsurprisingly, as they share most tariffs through the Mercosur common external tariff, Argentina has high import tariffs like Brazil. Bound tariffs, the maximum level permitted by the WTO, average over 31%, and although the tariffs actually applied were below this level they were significantly above EU levels, averaging 12.2% in 2006 (10.1% on agricultural products, and 12.6% on industrial products).[367] The CBI also noted that Argentina levies a value-added tax of 3% on domestic goods, but 10% on imported goods which they believe could be violating WTO rules which state that taxes on imports should not exceed those on similar goods produced within the country.[368]

Inflation & price controls

151. Inflation is widely regarded as a key issue, amid concern about whether the high growth experienced over the past few years can be sustained without inflation;[369] it is likely to be important in October 2007's presidential election. While in Argentina we learned of the widespread belief that official price indices do not reflect reality, and that the prices of items in the official basket of goods are tightly controlled while those of similar goods are not. The Economist noted the official monthly inflation rate in January 2007 was 1.1%, below estimates of 'true' inflation of between 1.5 and 2.0%, and that prices of non-controlled goods were expected to rise by 13-15% in 2007.[370]

152. The Argentine Government's so-called price "agreements" with businesses—tantamount to price controls—were the subject of widespread complaint during our visit. Unconventional means appear to have been used to enforce these controls, for example UKTI told us that President Kirchner "encouraged a blockade against Shell in February 2005 after the company decided to raise petrol prices."[371] We were surprised to hear that the Trade Minister was not aware of the problems relating to price controls in Argentina,[372] as in their evidence to us UKTI had cited "Argentine government intervention, including price control" as an example of an internal barrier to trade faced by UK companies.[373] These price controls risk deterring UK investment in Argentina.

Energy issues

153. There are also concerns that energy security issues jeopardise Argentina's continued strong growth, which the Lord Major said was "hampered by a severe lack of capacity in the energy sector, despite the strong demand."[374] The question of price control appeared to be acute in the energy industry and, as UKTI said, "particularly, though not exclusively" in the oil and gas sector.[375] The Argentine power grid is struggling to cope with demand, especially given the rapid rate of recent economic growth; and investment in greater capacity is being deterred by the fact that energy tariffs have been frozen since 2002, leading to domestic prices 50% below international prices. In March 2007, the Financial Times website stated that "most are afraid to criticise the government's distortionary policy openly, despite the fact that Argentina's oil and gas reserves are rapidly dwindling while a fast-growing economy and bargain prices mean demand for energy is higher than ever."[376] After the chief executive of the Brazilian state-owned oil company Petrobras voiced concerns that energy price freezes were discouraging investment, the Argentine planning minister said that its contracts could be seriously affected should it fail to invest sufficiently.[377] Shell has previously incurred a £3.5 million Government fine for allegedly failing to provide the domestic market with adequate supplies.[378]

IPR

154. The European Commission recently listed Argentina, along with Brazil and Paraguay, as countries where future deeper trade relationships would include a stronger focus on IPR enforcement.[379] Although, as noted above, Brazil was recently demoted from the US 'priority watch list' for intellectual property rights enforcement, Argentina remains on the list, with the main issues being pharmaceuticals patent and copyright infringements, although progress in reducing the patent application backlog and bilateral co-operation has been recognised.[380] Though it does acknowledge "recently implemented fast-track procedures for consideration of patent applications and the hiring of a significant number of patent examiners,"[381] the CBI noted that there was a "substantial patent backlog" in Argentina.[382]

Other issues

155. UKTI told us that in the longer term Argentina's economic recovery would require structural reforms: "combating tax evasion, excessive bureaucracy, corruption and an inefficient judiciary system will be essential to improve Argentine competitiveness. Improvements in legal and judicial security are needed to attract, and maintain, foreign investment."[383] We agree. As in Brazil, local partners are considered important in Argentina, with multinationals investing in the telecommunications and energy markets in conjunction with local private investors.[384]

156. The CBI also noted other issues in Argentina, including employment law, dealing with licences and starting a business.[385] Language was also seen as a barrier, particularly for smaller exporters, as promotional material and labelling needed to be translated into Spanish.[386] UKTI also seemed undecided to what extent Argentina could be seen as a means of access to the other Mercosur member countries or to Latin America more generally, stating at one time that a presence in Argentina may help access to other Spanishspeaking Latin American markets, and on another that Argentina was not generally viewed as a beachhead for Latin America.[387]

UKTI support

157. Argentina has the second largest UKTI resource in the Mercosur countries, with 7.8 full-time equivalent staff. While this is expected to remain unchanged despite the shift in UKTI's focus, we were surprised to find that Argentina was not included in its 15-strong emerging markets category. Emerging market status is based on various criteria, such as demographics, education and growth, and UKTI includes Brazil and Mexico in Latin America, and also South Africa, in this list.[388] When asked about this omission the Trade Minister said that at present it was "not quite at the level of these other markets, but that does not mean it will not get there."[389] The last DTI ministerial visit to Argentina was in October 2000, compared with September 2006 for Brazil.[390] Although sensitivities around the Falkland Islands obviously remain, and will be heightened during this 25^th anniversary year of the conflict, the fact remains that Argentina is a country with strong European roots in which Britain has played an important part over many years and in which Britons feel very much at home. The British Argentine Chamber of Commerce informed us that UKTI financial support for outward missions to Argentina had been withdrawn in 2005 after changes in government support for export promotion.[391] We believe that this decision should be reconsidered in the light of Argentina's future potential. The BACC also say that they would "welcome the opportunity of working closer with UKTI and having better communication in order to help British companies understand and identify opportunities in Argentina". We support this suggestion.

Uruguay

158. Uruguay has suffered from the economic crises experienced by its larger neighbours Argentina and Brazil in the past, but as UKTI told us: "Uruguay's hallmarks are political stability and low corruption, combined with an open financial system. These are important assets, given the relative instability of some of Uruguay's neighbours". Uruguay's other advantages include the highest literacy level in Latin America, with high education levels and good universities.[392] The World Bank also ranks Uruguay highest among Mercosur members for ease of doing business, at 64^th out of 175 countries. The Economist has even suggested that Uruguay could be "the new Chile", citing its successes in farming, tourism and finance.[393]

159. Uruguay's main export is meat, as well as other agricultural products including vegetables, citrus, rice and soya. Uruguay is the UK's 105^th export partner[394] while the UK is Uruguay's 16^th most important supplier of imports, of which a high proportion is accounted for by Scotch whisky. The UK's share of the Uruguayan market is 2%.[395] Among EU countries the UK ranked 5^th for goods exports to Uruguay in 2005 and 4^th for goods imports from Uruguay.[396]

160. The main growth sectors in 2006/07 as identified by UKTI were agriculture, food and beverages, tobacco and chemicals.[397] UKTI also cites "longstanding commercial ties" between the UK and Uruguay,[398] believing the market to offer "worthwhile business opportunities".[399] It notes: "Research and preparation are essential to succeed against stiff competition, but niche markets can often be found. Uruguay is well worth considering for experienced exporters and those already doing business elsewhere in Latin America."[400]

161. UKTI states that opportunities are available in pharmaceuticals, telecommunications, IT, agribusiness and machinery.[401] It sees Uruguay's biggest asset as its access to the Mercosur markets. For example: "Uruguay is a services-oriented country, taking advantage of its key location between Argentina and Brazil. As a consequence, the country has developed a large financial sector to provide services to residents of the surrounding countries."[402] While we saw strong ICT sectors in both Brazil and Argentina, Uruguay is the biggest Latin American software exporter, although Brazil produces more.[403] Software companies are able to benefit from the tax incentives available in Uruguay's Free Trade Zones even if they are not based in these zones, although UKTI said that the zones themselves also offer a "stable policy framework, good telecommunications and logistic facilities".[404]

162. Indian IT consulting company Tata Consultancy Services opted to base a Global Development Centre in Montevideo from which it serves its Latin American clients. It based its decision on education levels, foreign language skills (both English and Portuguese), the stable political environment, the high quality of living and the government's willingness to allow employees to be brought in from abroad.[405] LINPAC Uruguay considered that the country has "a long-standing reputation for reliability among foreign investors", and noted its legal system, transparent and open market, strong regulatory framework, duty- and quota-free access to other Mercosur markets, equal treatment of local and foreign workers, lack of restrictions on foreign nationals on boards (unlike other Mercosur countries), free circulation of capital and remittances abroad, its good ports, airports and links to Argentina and Brazil, the bilateral UK-Uruguay IPPA, high literacy levels, and Uruguay's "pro-UK" attitude. LINPAC also pointed out that there were a number of foreign companies that had used Uruguay's Free Trade Zones to site their regional Mercosur hubs.[406]

163. The asymmetries (of area, population and economy) inherent in the Mercosur bloc are a major issue for Uruguay. While there have been recent initiatives to try to offset this, these may not be sufficient to deflect Uruguay from ultimately pursuing a bilateral trade agreement with the US, which would almost certainly require it to leave Mercosur and perhaps become an associate member, like Chile.[407] The Economist cites Uruguay's membership of Mercosur, and therefore its inability to conclude bilateral free trade agreements directly with its trade partners, as one of two barriers to recreating Chile's economic success, with the other barrier being domestic political restraints on economic liberalisation and reform.[408]

164. In terms of UKTI resources, there has been a small team of 1.9 full-time equivalent staff operating in Uruguay, which is a service level agreement market, meaning that "only limited UK government support is provided, including responding to commercial enquiries; lobbying in support of UK firms; responding to, and supporting, of British business visitors; and supporting British businesses established in the market."[409] However, UKTI will withdraw from Uruguay from the end of March 2008. There will then no longer be a UKTI commercial presence in Uruguay, although casebycase lobbying for commercial purposes will continue to be carried out by the Ambassador.[410] This decision is in part due to the reassessment of UKTI's priorities following the new strategy to focus on key emerging markets such as Brazil. The effects on Mercosur more broadly are looked at separately below.

165. We are concerned that the UKTI service for Uruguay will share the fate of that for Paraguay, which no longer has a UKTI presence and for which very limited information was available for this inquiry. This move seems perverse, given the strong historic ties of friendship between the UK and Uruguay, the country's benign business environment, that UK companies are choosing to invest in Uruguay as a base from which to access other South American countries, the high level of inquiries received relating to Uruguay (see paragraph 173) and that the institutions of Mercosur are based in Montevideo. We are unconvinced that it will prove possible to provide sufficient quality of cover from other neighbouring posts and we therefore urge UKTI to reverse its decision to remove its commercial presence from Uruguay.

Paraguay

166. We received little information on Paraguay, and so we are able to make only general comments about the country. This is in part because UKTI has had no direct presence there since the British Embassy was one of eight closed after the 2004 Spending Review. As UKTI and the Trade Minister told us, this is a reflection of the fact that Paraguay was ranked as the UK's 144^th export partner in 2005.[411] There is an Honorary Consulate in Asunción, but Paraguay is covered from Buenos Aires and UKTI offers little support other than "lobbying and political support by the Ambassador in Buenos Aires on a case-by-case basis".[412] Although the Foreign Office's web-page on the country gives limited economic and commercial information, the UKTI website has even less information. While a recent written answer on the main sectors in the Mercosur countries gave detail for the other member countries, on Paraguay it only stated that it "does not have any dedicated UKTI resource to deal with commercial enquiries. However, the dominant sector is agriculture."[413] Although we accept that limits on its resources mean that UKTI must make choices between markets globally, we believe that while Paraguay may not merit a full service there should at a bare minimum be basic market and sectoral information available through the UKTI website, particularly when information is available on the website of one of its parent departments.

167. In recent years Paraguay has seen growth of 3.5-4%, accompanied by policies to combat inflation, strengthen public finances, and reduce public debt down towards 30% of GDP.[414] The Foreign Office states that the agriculture and agro-industry account for 30% of economic output and 95% of exports, and offer "worthwhile opportunities for British exporters and investors". UK companies are operating in Paraguay, including Lloyds TSB, Shell, Unilever, Diageo, and a local agent for Land Rover. The UK's main exports are primarily alcoholic beverages, along with textiles, road vehicles, organic chemicals, power generating machinery and equipment, and chemical materials. The UK's main imports are sugar, cork and wood, beverages, organic chemicals and clothing. Among EU countries the UK ranked 4^th for goods exports to Paraguay in 2005, but 9^th for goods imports.[415] Paraguay is trying to increase exports of agricultural and handicraft products through PROPARAGUAY, its trade promotion body.[416] UKTI outlined concerns about IPR infringements and smuggling of a range of goods from Paraguay intended for resale to tourists under a preferential tax regime.[417] The CBI also said that Paraguay was "a major source of counterfeit goods".[418] Paraguay is listed by the European Commission as a country where future deeper trade relationships would "include higher focus on IPR enforcement",[419] while the US has highlighted IPR concerns in Paraguay and continues to monitor the situation.[420]

168. Like Uruguay, Paraguay is economically dominated by Brazil and Argentina, and UKTI noted that it "has been unable to redress the unilateral trade restrictions, imposed by Argentina and Brazil, through Mercosur and this has resulted in increased opposition within Paraguay to Mercosur during the past few years."[421] Unlike in the case of Uruguay we received no evidence of UK companies using Paraguay as a base to access the larger markets through the Mercosur common market.

Venezuela

169. As a new Mercosur member, Venezuela is in a transition period from its former Andean Community membership. Its integration into Mercosur is phased: tariffs with Argentina and Brazil are to be removed by 2012, with preferential access for main imports from Paraguay and Uruguay offered immediately and free trade by 2013, and a requirement to adopt the Mercosur common external tariff in four years.[422] UKTI commented that some sectors are protected during the transition process, such as food, livestock, software, electronic equipment and automobiles.[423] As the CBI noted, "Venezuela will now need to undertake important work to implement Mercosur trade rules and regulations, including adopting the bloc's Common External Tariff, and to transpose Mercosur's agreements with third countries into its domestic legislation."[424]

170. We received limited evidence on the country and the potential impact of its accession, although one might expect Venezuela's accession to Mercosur to change the course of the bloc's development. There are potentially greater political risks involved in a Mercosur with Venezuela as a member. President Hugo Chávez was recently reelected for a third sixyear term, having raised concerns among businesses that various strategic industries could be nationalised. While there have been some nationalisations, which have seen at least some companies adequately compensated,[425] it is currently unclear how nationalisation policy will develop.

171. The World Bank ranks Venezuela even lower than Brazil for doing business—164^th out of 175, compared with 121^st for Brazil. UK companies are present in Venezuela, including BP, Shell, Wood Group, Holcol, GlaxoSmithKline, Diageo and Unilever.[426] In 2005, total UK exports of goods and services to Venezuela were valued at £329 million, and imports of goods and services at £418 million.[427] Among EU countries the UK was the 3^rd largest goods importer from Venezuela in 2005, after Spain and the Netherlands, and 4^th for goods exports.[428] The main UK goods exports are chemicals, beverages, and medicinal and pharmaceutical products. UKTI has identified the main growth sectors for 2006-07 as: oil and gas, agriculture, construction, consumer goods, education and training, environment, financial services, ICT, power, security, and tourism.[429] Like Brazil, Venezuela is a UKTI priority market for oil and gas, with opportunities for UK businesses available through minority-share joint ventures, strategic associations and profit sharing agreements.[430]

Bolivia

172. Bolivia, currently an associate member of Mercosur, has also requested to become a full member. However, this would mean adopting the Common External Tariff which averages 12%, higher than Bolivia's average 5% tariff.[431] In January 2007 the Mercosur countries agreed to consider Bolivia's application in a working party, with a decision not expected until mid-2007 or early 2008.

UKTI resources across the Mercosur countries

173. Across Mercosur, UKTI has identified only Brazil and Venezuela as priority markets in the oil and gas sector. The level of UKTI resources across the countries in the bloc reflects the organisation's prioritisation and the relative importance of each for UK trade:Figure 9: UK goods trade with Mercosur countries, 2005

	Exports		Imports
	£ million	Rank	£ million	Rank
Argentina	169	69	291	65
Brazil	840	35	1,771	32
Paraguay	12	144	1	179
Uruguay	37	105	59	92
Venezuela	236	56	395	56

Source: Appendix 23, annex L

174. We noted earlier that Brazil has been a beneficiary of the increased resources available to key emerging markets under UKTI's new strategy.[432] However, as figure 10 illustrates, after a slight increase in total resource to 2007/08 UKTI's withdrawal from Uruguay in 2008/09 will see total resources across the bloc almost unchanged from their 2005/06 level. Indeed, across the whole of South America UKTI resources are to fall by 1.5 full-time equivalent staff.

Figure 10: UKTI staff (full-time equivalent) employed in Mercosur countries

	2005-06	2006-07	2007-08	2008-09	2009-10
Argentina	7.8	7.8	7.8	7.8	7.8
Brazil	39.0	38.0	41.0	41.0	41.0
Paraguay	0.0	0.0	0.0	0.0	0.0
Venezuela	5.0	5.0	5.0	5.0	5.0
Uruguay	1.9	1.9	1.9	0.0	0.0
Mercosur total	53.7	52.7	55.7	53.8	53.8
South America total	76.0	74.4	77.4	74.5	74.5

Source: HC Deb, 6 Feb 2007, col 904WFigure 11: UKTI substantive enquiries received, 2005/06

	Number of enquiries	Enquiries per staff member
Argentina	36	4.6
Bolivia	10	4.5
Brazil	471	12.1
Chile	144	21.5
Colombia	9	2.0
Ecuador	5	1.5
Peru	10	2.2
Uruguay	252	132.6
Venezuela	79	15.8

Source: Appendix 24 (UK Trade & Industry) annex Q and HC Deb, 6 Feb, 2007, col 904W (2005/06 data)

175. The Minister told us that Paraguay and Uruguay were ranked 144^th and 105^th as UK marketplaces, arguing: "The reality is that there is a finite amount of resources and we are investing to get the best bang for our buck, and quite frankly that is the best way to do it."[433] He also said that companies looking at these two countries "will get a service but a different one."[434] However, UKTI figures show that Uruguay was second only to Brazil in terms of the number of substantive enquiries received from businesses in 2005/06, and in terms of enquiries per full-time equivalent member of staff (also in 2005/06) Uruguay ranks highest by far among the countries for which data were supplied (see Fig. 11).[435]

176. On UKTI support, the CBI said that "if the market can be effectively served, either through honey-potting[436] or through regional hubs […] then that need not necessarily be detrimental to business interests."[437] They noted that, among the original Mercosur members, "Brazil is where the key opportunities are, Argentina has some issues in and of itself and, to be honest, we do not get a lot of inquiries on the other two."[438] The Government's recent Latin America Strategy states that, as it had been identified as an emerging market, Brazil would "be the focus of UKTI's efforts to deepen trade and investment relationships […] transferring significant resources from mature markets to increase the UK's impact in these important high growth economies."[439] While we welcome the decision to increase UKTI resource in Brazil, this increase is very modest indeed. It also appears to be coming entirely at the expense of UKTI's commercial presence in Uruguay. While we accept that Uruguay is not one of the UK's largest trade partners in terms of rankings, that UKTI has insufficient resources to cover every country, and that the bulk of resource is said to be being transferred from developed US and European markets, Uruguay can scarcely be defined as a 'mature market'. Moreover, Uruguay's significance to UK business may increase if in the future Mercosur's institutions develop, as these are based in the Uruguayan capital, Montevideo. Should Mercosur develop more fully, a reassessment of UKTI resources would be essential.

177. We also note the view expressed by British Expertise that the greatest opportunities may not be in Brazil but in the smaller countries in the region.[440] UKTI must ensure that while focusing on key emerging markets like Brazil it does not miss out on opportunities available from smaller markets in Mercosur and Latin America more generally and ensure that it transmits these opportunities to UK businesses.

345 Appendix 23 (UKTI), annex J Back

346 Ibid. Back

347 UKTI country profile (background page); https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/countries Back

348 Appendix 26 (UKTI), para F1 Back

349 Appendix 23 (UKTI), annex J Back

350 Ibid., annex J2 Back

351 Appendix 3 (Argentine Ambassador), annex 2 Back

352 Appendix 23 (UKTI), annex J Back

353 HC Deb, 24 Jan 2007, col 1785W Back

354 Appendix 5 (British Argentine Chamber of Commerce) Back

355 Appendix 12 (Corporation of London), paras 10-11 Back

356 'New mission to bolster legal links with Argentina', Law Society Gazette, 22 March 2007, p 8 Back