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Political and Economic Developments in Brazil and Their Implications for Canadian Policy and Interests in the Region

February 17, 2011

Political and Economic Developments in Brazil and Their Implications for Canadian Policy and Interests in the Region

Testimony Before the Canadian Senate Committee on
Foreign Affairs and International Trade
February 17, 2011

Eric Farnsworth
Vice President, Americas Society/Council of the Americas

***** As Delivered *****

Thank you, Madam Chair, and thank you for the invitation to join you and your colleagues today for this important discussion on developments in Brazil and their implications for Canadian policy and interests in the Latin American region. I congratulate you for your leadership on these issues. I am also pleased to share this table with others of such stature and prominence (NB: Paulo Sotero and Leslie Bethell, Woodrow Wilson Center).

The Council of the Americas is a policy and business organization founded in 1965, dedicated to the promotion of democracy, open markets, and the rule of law across the Americas.  Since our founding we have seen dramatic, positive changes. Perhaps no nation in the region better exemplifies that than Brazil, a nation on the move: a strong democracy with a growing economy, finding its voice internationally as it seeks a bigger role on the global stage.   

Brazil has been on a tear since former President Fernando Henrique Cardoso conquered inflation in the 1990’s. His successor, Luiz Inácio Lula da Silva, effectively built on this solid foundation over the past eight years to grow the economy, expand the middle class dramatically, reduce poverty (which, at a quarter of the population, still remains too high), and expand Brazil’s international influence. As Brazil’s first female president, Dilma Rousseff’s January 1st inauguration was both a manifestation of Brazil’s social strides as well as a strong reaffirmation of the outgoing Lula’s established path. 

We anticipate much policy continuity in Brazil, with an even greater focus on domestic development issues.  President Rousseff has said that domestic issues including poverty alleviation and needed economic reforms will be at the very top of her agenda.

With an economy the size of the rest of the region put together, and rapid growth—7.5 percent in 2010 with 5.5 percent projected by the Central Bank through 2014—Brazil is leading Latin America’s conscious and confident outreach to partners beyond North America, notably in Asia, to diversify relations.  In fact, China is now Brazil’s top trade partner, a relationship that is primarily built on Brazilian agriculture and mining exports.  

The global community has taken notice of these many changes; a member of the G20, Brazil has been awarded the World Cup in 2014 and the 2016 Olympic Summer Games. 

There is a lot here to celebrate. Additionally, Brazil is taking an expanding, cooperative role on many issues where Canada is also active, including peacekeeping in Haiti, as well as Africa; counter terrorism and law enforcement; regional economic development; and clean energy and global climate change mitigation. 

Further cooperation with Brazil can and should be pursued, which will be particularly important from a strategic perspective as Brazil determines how to use the leadership that it is appropriately acquiring. Much of this depends on how Brazil defines its international interests under president Rousseff, for example as a Western nation, as a member of the BRICs, as a leader of the developing world, a leader of South America, or, more likely, in some combination of the above.

With this in mind, several issues present themselves for additional consideration in the Canada-Brazil relationship. In the first instance, Canada’s stated foreign policy priority of enhanced engagement with the Americas and promoting security, democracy, and prosperity in the region simply cannot be achieved without a robust bilateral relationship with Brazil. Although differences have been apparent in the past, particularly in the commercial relationship, nonetheless the areas for cooperation would seem to outweigh any potential differences by far. 

For example, agribusiness is one of the most technologically advanced industries in Brazil, and Brazil is, indeed, globally competitive in agriculture, as is Canada. But rather than seeing this as a competitive issue, why not work together—with different growing seasons—in areas such agricultural research and development, emphatically including clean energy research, where both countries lead? Or, on the trade side, in working together in forums such as the WTO to reduce global agricultural price supports? 

Active cooperation on global climate change mitigation issues also should be considered. Brazil’s Amazon is the lungs of the earth, while Canada’s oil sands production is seen by some as environmentally costly. Perhaps, with creative thinking, the two nations might work together on global carbon issues and also new technologies to address environmental concerns. 

The two nations might also consider enhanced defense cooperation activities, even, perhaps, joint exercises, which would assist peacekeeping and humanitarian operations both in the hemisphere and elsewhere, where both nations are active. At the same time, it must be said that sub-regional groupings such as UNASUR (the Union of South American Nations) and related defense groupings that purposefully exclude both Canada and the United States are not necessarily conducive to such an approach.     

Brazil is also a natural partner in global financial issues, particularly in the G20. Both Canada and Brazil have a strong story to tell coming out of the global financial crisis of 2008-2009, a story that was written by sound policies particularly in your respective banking sectors. As further regulations are written and implemented, the potential for collaboration on these issues is vast. At the same time, coordination of efforts to address difficult issues such as the value of China’s currency—which Brazilian leaders have spoken out against—could also be mutually rewarding.

Trade and investment is another area for increased attention. Companies like Vale have already seen the opportunities. In one of your previous sessions, Senator [Pamela] Wallin asked for the “elevator speech” on a free trade agreement between Canada and Brazil. Here it is: Brazil is a large, rapidly expanding market with increasing purchasing power and an affinity for products from North America. As Canada looks abroad to diversify its own trade relations beyond the United States so as to be less dependent on the US economy and the economic cycle, Brazil offers one of the best opportunities to expand Canadian exports significantly, from high tech and manufactured products to energy services to finance and almost everything in between. 

Brazil is Latin America’s largest democracy, with a stable and growing economy. And if Canada moves first, like it did with both Chile and Colombia, it will steal a march on the United States, and build market share for Canadian products well in advance of the United States. The advantages of such an approach should be self-evident.   

That’s not to say all is perfect on the commercial side in Brazil. It is not. Brazil remains in many ways a difficult place to do business. But as a target of opportunity for Canada in trade, investment, and across the board, Brazil should be right at the top of the list.

Thank you, again, Madam Chair, for the opportunity to address you this morning, and I look forward to your questions.