2 Government policy towards Brazil |
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 Brazila country of almost 200 million peopleis
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".
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".
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.
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.
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".
Mr Domjan agreed, calling the recent discoveries important on
a "global scale".
Dr Rosillo-Calle told us that "in future Brazil is going
to be a major player [in the energy sector], I am convinced of
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".
Mr Bishop also identified Brazil's importance as a source of organised
immigration crime, money laundering and cybercrime.
Mr Bishop further noted that the Brazilian federal police were
focused on tackling the problems caused by cocaine production
in South America.
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
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 relationsformal
and informalwith countries around the world.
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,
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
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 requiretherefore,
to the mutual benefit of both of usthan may be the case
with some other countries".
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
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
- 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.
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:
|August 2010||Vince Cable, Secretary of State for Business, Innovation and Skills
|September 2010||Gerald Howarth, Minister for International Security Strategy (MOD)
|February 2011||Lord Brittan, Prime Minister's Special Adviser on Trade
|April 2011||Baroness Neville-Jones, Minister of State for Security and Counter Terrorism (Home Office)
|April 2011||Caroline Spelman, Secretary of State for the Environment, Food and Rural Affairs (DEFRA)
|April 2011||Gerald Howarth, Minister for International Security Strategy (MOD)
|May 2011||Jeremy Browne, Minister of State, FCO
|June 2011||Nick Clegg, Deputy Prime Minister, accompanied by David Willetts, Minister of State, BIS, Jeremy Hunt, Secretary of State, Culture, Media and Sport and Jeremy Browne, Minister of State, FCO
|October 2011||Simon Burns, Minister of State, Department of Health
In addition, the Lord Mayor of London led a business delegation
to Brazil in June 2011 and in September 2011, the Prime Minister
and Foreign Secretary held bilateral meetings with their Brazilian
18. The FCO described for us the British Government's representation
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).
In addition, the British Councilwhich is funded in part
by a direct grant from the FCOmaintains 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.
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."
He further indicated that "about half [of the additional
staff allocated to] countries such as Brazil, Turkey, Mexico and
Indonesiawill be UK-based."
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
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
or director-general level ambassadorships. It really is one of
the most highly sought-after jobs.
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 diplomacyimportant though some campaigns
aretowards trying to make sure that we get the core basics
right, in terms of our diplomatic offering.
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". 
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".
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.
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.
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
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.
22. He went on to suggest that the Olympics were one of the
key topics of conversation between him and his Brazilian counterparts.
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".
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.
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
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 areasproject 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."
26. To promote the UK's "soft power"
in connection with the London Olympicswhich bills itself
as the "greenest" everthe 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
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.
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
which is due to be signed later this year.
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.
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.
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.
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.
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
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
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".
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.
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
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
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
5 Q 122 Back
Foreign Secretary, Canning Lecture, Canning House, 9 November
All quotes are from the Foreign Secretary's "Canning Lecture"
of 10 November. Back
See: Q 2, Q 22, Q 63, Q 66 and Q 95. Back
Q 2 Back
Q 2 Back
Q 2 Back
Q 22 Back
Q 33 Back
Q 30 Back
Q 66 Back
Q 95 Back
Ev 44, para 5 Back
Q 122 Back
Q 125 Back
Mercosur (or Mercosul) is a free-trade bloc founded in 1991 and
incorporating Argentina, Brazil, Paraguay and Uruguay. Back
Ev 44, para 4 Back
Ev 45, para 7 Back
Ev 65 Back
HC Deb, 11 May 2011, cols 1166-67 Back
HC Deb, 11 May 2001, col 1171 Back
Q 141 [Angus Lapsley] Back
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
Q 127 [Angus Lapsley] Back
Q 126 Back
Q 126 Back
Q 127 [Angus Lapsley] Back
Q 127 [Jeremy Browne] Back
Foreign Affairs Committee, Second Report of Session 2010-12, FCO
Public Diplomacy: The Olympic and Paralympic Games 2012, HC
Ev 45, para 8 Back
Q 162 Back
Q 162 Back
Q 66 Back
Q 89 Back
Q 90 Back
Q 162 Back
CCH British tax guide, Wolters Kluwer (UK) Limited; cch.co.uk Back
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
Ev 69 Back
HC Deb, 22 March 2011, cols 855-58 Back
"Reform of the Points Based Student (PBS) Immigration System:
Impact Assessment", UK Border Agency, 1 June 2011,
page 19 Back
See: "In Brazil, a plan to send students to world's top colleges",
Time Magazine, 21 September 2011. Back
Jeremy Browne MP, Oral Evidence to Home Affairs Committee, 3 March
2011, HC 773, Q 368 Back
Business , Innovation and Skills Committee, Eighth Report
of Session 2010-12, Trade and Investment: China, HC 1421,
paragraph 65 Back
Ev 70 Back
Ev 70 Back
Ev 70 Back