Brits Turn Their Backs on Brazil

Lloyds Bank When Lloyds Bank decided to sell off its Brazilian operations in 2003 it was ending a presence in the country stretching back 140 years. It was also a sign of the lack of interest in Brazil – and Latin America – among British investors who are now more excited about places like China and India.

The term Latin America gives the impression that South and Central America were formed by Latin nations and people, but several other countries were involved in shaping the continent's history – the Netherlands, France and, above all, Britain. The British brought the Portuguese royal family to Brazil to escape Napoleon's armies and, in turn, gained many legal and commercial privileges.

The British were also actively involved in the creation of states such as Argentina, Uruguay, Chile and Peru. Until the arrival of American capital at the beginning of the 20th century, Britain was still the main foreign investor in Brazil.

That has all changed and the UK has fallen back steadily. In 2005 the UK was in 5th position. It was, therefore, interesting to see that a committee of MPs from the House of Commons has just published a report calling for UK industry to start showing more interest in Brazil.

The site Brazil Political Comment will shortly be presenting an interview with the chairman of the House of Commons Trade and Industry Committee, Peter Luff, MP. In the meantime, we present a summary of the Committee's report published on June 13, 2007, entitled "Trade with Brazil & Mercosur".

The Committee concludes that when considering where to trade and invest UK businesses often overlook the large Brazilian market in favour of the faster-growing economies of China and India.  The Committee has previously cautioned that our competitors are exploiting opportunities in both India and China, and the same appears to be true of Brazil.

Knowledge Gap

One of the key reasons for the relative lack of engagement by UK businesses appears to be a lack of knowledge of the opportunities available – for example in Brazil, in aerospace, financial services, healthcare, environmental technology, Information and Communications Technology, and oil and gas.  There also appears to be insufficient understanding of the nature of the barriers-such as bureaucracy, tariffs and taxes-which, while significant, are not insurmountable.

The Committee urges UK Trade and Investment to boost its resources in the region, which remain below past levels.  The modest increase in UKTI resources for Brazil is only being achieved by closing all operations in Uruguay.

Bearing in mind the importance of the financial services sector to the U.K. economy, the Committee also urges UKTI to look more closely at its strategy for Brazil.  Dedicated financial services strategies for China and India are being developed, with Russia to follow this year; as the fourth member of the 'BRICs', and with significant activity already being undertaken by our competitors in the US, a dedicated strategy for Brazil and its significant opportunities should be seriously considered.

Biodiversity Opportunities

2007 is the UK-Brazil Year of Science, which the Committee hopes will help emphasize how much both nations have to offer each other in this area.  The Committee particularly notes the opportunities provided by Brazil's biodiversity, its expertise in the field of bio ethanol and areas such as the development of vaccines.

Among the other Mercosur members, Argentina similarly offers opportunities while also presenting barriers to trade and investment, and Uruguay has also attracted British investors, in part due to its stability and proximity to Argentina and Brazil. The UKTI strategy has not had the positive effects seen in Brazil in these other countries.

The Committee is especially concerned that UKTI presence in Uruguay, the busiest UKTI operation in the region, is to be removed, while it has already closed its offices in Paraguay.

Committee Chairman Peter Luff MP said: "The Committee's examination of British policy towards Mercosur, and particularly Brazil has demonstrated the very different nature of the market to that of the other BRIC economy it studied last year, India.  We recognise the potential not only of Brazil, but of the other members of the Mercosur bloc. 

There are clearly questions to ask about the way in which Mercosur will develop both politically and economically and about some aspects of the way in which its members conduct their affairs, but we are enthusiastic about many of the opportunities open to UK business in specific markets."

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicações. This article originally appeared on his site www.brazilpoliticalcomment.com.br. He can be contacted at jf@celt.com.br.

© John Fitzpatrick 2007

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