UK-Brazil Relations - Foreign Affairs Committee Contents


2  Government policy towards Brazil

Why is the FCO promoting a stronger bilateral relationship?

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

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

  • International relations. "We are in a new phase in the concert of nations, in which states that have not traditionally dominated or sought dominance have an equal role to play in world affairs. [...] we cannot protect the interests of British citizens unless we look beyond Europe and North America."
  • Trade and investment. "We will look for new economic opportunities, encouraging investment in the UK, working to raise the profile of the region with British business, and helping British business access markets in the region."
  • Ecology. Latin America countries contain "at least 40% of the world's remaining rainforest, 35% of global reserves of freshwater and 25% of the world's cultivatable land."
  • Security, including issues of drug trafficking.[7]

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

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

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

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

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

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

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

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

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

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

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

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

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

  • The doubling of UK exports to Brazil from £2 billion per annum to £4 billion;
  • The UK to become one of the top 10 recipients of Brazilian FDI [foreign direct investment];
  • UK companies to win major contracts for World Cup 2014 and Rio 2016 Olympics;
  • A sharp increase in UK-Brazil research and development collaboration, particularly in high-tech spin-outs and SMEs [small and medium enterprises];
  • An ambitious EU-Mercosur[20] Free Trade Agreement, and progress towards a successful Doha round;
  • London 2012 [Olympics] increasing positive perceptions of the UK in Brazil, 50% more Brazilian tourists visiting UK per year;
  • Closer co-operation with Brazil on climate change, biodiversity and deforestation;
  • UK-Brazil co-operation on development in other regions, especially Africa; and
  • Greater UK-Brazil collaboration on international security challenges, on the UN Security Council and in other bodies.[21]

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

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

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

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

The UK is currently represented in Brazil with, an Embassy in the capital Brasília, and Consulates in São Paulo (focused on commercial work generally) and Rio de Janeiro (focused on consular work, the energy sector, defence sales and the opportunities arising from the London-Rio Olympics and the World Cup in Brazil). There are also small commercial offices in Recife and Porto Alegre. There are currently 28 UK-based staff in the network, and 233 locally-engaged staff (including a large guard force).[22]

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

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

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

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

The job of Ambassador in Brazil is now one of the top jobs in the Foreign Office. It is one of the 10 or so SMS3[27] or director-general level ambassadorships. It really is one of the most highly sought-after jobs.[28]

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

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

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

The Olympic Games

21.  The FCO has identified the London 2012 Olympic and Paralympic Games as an event which will improve perceptions of the UK across the world. We have commented on the FCO's strategy for exploiting the Games in our recent Report on FCO Public Diplomacy: The Olympic and Paralympic Games 2012.[33] Given that the next Olympic Games, in 2016, will take place in Rio de Janeiro, the FCO has acknowledged the opportunity for the shared experiences to bring the UK and Brazil closer together:

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

Jeremy Browne elaborated on this theme:

I showed the Brazilian Ambassador around the [Olympic] park, and he seemed very impressed with the ideas that we had. We are working closely with them at lots of different levels and will continue to do so. Brazilians will see it in receptions a year before the games and no doubt there will be pictures in Brazilian newspapers. It is a nice showcase for Britain in that way, but there is a much more detailed working relationship with the Brazilians, because they are taking over the games from us in 2016.[35]

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

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

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

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

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

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

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

PRACTICAL MEASURES WHICH THE FCO COULD TAKE

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

Double taxation agreements

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

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

31.  In correspondence with us the Government told us on 15 August that "There are presently no negotiations taking place on a double taxation agreement" and that previous negotiations had failed "owing to the differing treaty policies of the two countries." However, the UK and Brazil have negotiated a Tax Information Exchange Agreement[42] which is due to be signed later this year.[43]

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

Changes to student visa regulations

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

  • Stricter sponsorship and accreditation requirements for education providers;
  • A certificate of English-language ability at B2 or above from an independent test provider;
  • A maximum of three years study below degree level and five years at National Qualifications Framework 6-7 (undergraduate and postgraduate level) with exceptions for those at the higher level doing a PhD, as well as for those courses which require as a matter of professional qualification a longer duration than five years (e.g. medicine, architecture); and
  • Students studying with private education providers will be unable to work whilst studying. Students at publicly-funded educational providers will be able to work 20 hours a week if they are at University or 10 hours a week if they are at college.[44]

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

34.  In July 2011, Brazilian President Dilma Rousseff announced the "Science without Frontiers" programme which plans to introduce 75,000 new government-funded university scholarships for Brazilian students to study abroad by 2014.[46] During our visit to Brazil, concerns were raised by some of our interlocutors that the proposed changes to UK student visa applications would make it significantly more difficult for Brazilian students to capitalise on President Rousseff's initiative by studying in the UK. We understand that the Brazilian government itself is concerned about the possible impact of the new UK application process for student visas.

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

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

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

37.  In a letter of 15 August the Government told us that the UK has been approached by the Brazilian government as a preferred destination for Brazilian students studying abroad as part of the "Science without Frontiers" programme and that the British Embassy in Brasília has held discussions with the Brazilian Ministries for Education and Foreign Affairs on "how such a scheme might work within existing UK migration constraints". Discussions are ongoing and are centred around "selected Brazilian students spending a period of less than twelve months at a UK institution as part of a wider course of study." In addition to these discussions, the Embassy and British Council have highlighted this programme as an opportunity for the UK education and private sectors. The Deputy Prime Minister's visit in June 2011 saw a commitment to "set-up a UK-Brazil implementation group to take forward higher-education co-operation".[49]

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

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

Rio+20 Conference

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

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

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


5   Q 122 Back

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

7   All quotes are from the Foreign Secretary's "Canning Lecture" of 10 November. Back

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

9   Q 2 Back

10   Q 2 Back

11   Q 2 Back

12   Q 22 Back

13   Q 33 Back

14   Q 30 Back

15   Q 66 Back

16   Q 95 Back

17   Ev 44, para 5 Back

18   Q 122 Back

19   Q 125 Back

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

21   Ev 44, para 4 Back

22   Ev 45, para 7 Back

23   Ev 65 Back

24   HC Deb, 11 May 2011, cols 1166-67 Back

25   HC Deb, 11 May 2001, col 1171 Back

26   Q 141 [Angus Lapsley] Back

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

28   Q 127 [Angus Lapsley] Back

29   Q 126 Back

30   Q 126 Back

31   Q 127 [Angus Lapsley] Back

32   Q 127 [Jeremy Browne] Back

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

34   Ev 45, para 8 Back

35   Q 162 Back

36   Q 162 Back

37   Q 66 Back

38   Q 89 Back

39   Q 90 Back

40   Q 162 Back

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

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

43   Ev 69 Back

44   HC Deb, 22 March 2011, cols 855-58 Back

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

46   See: "In Brazil, a plan to send students to world's top colleges", Time Magazine, 21 September 2011. Back

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

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

49   Ev 70 Back

50   Ev 70 Back

51   Ev 70 Back


 
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© Parliamentary copyright 2011
Prepared 18 October 2011