Trade & Industry Committee

Session 2006-07

11 June 2007


STRICTLY EMBARGOED: NOT FOR PUBLICATION OR BROADCAST BEFORE 00.01 HRS Wednesday 13th June 2007

Trade and Industry Committee encourages UK business to take advantage of opportunities in Brazil and rest of Mercosur

The Trade and Industry Committee today publishes its report, Trade with Brazil & Mercosur.  Mercosur, the Common Market of the South, is made up of Brazil-which dominates the region in terms of economy, size and population-Argentina, Paraguay, Uruguay and Venezuela.

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.

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.

While the Committee welcomes the Joint Economic and Trade Committee (JETCO) set up by the UK and Brazilian governments, it notes that after six months progress appears slow in certain key areas.

The Committee also urges UK Trade and Investment (the subject of a parallel report from the Committee last week) 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 UK 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.

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, which is per capita the busiest UKTI operation in the region, is to be removed, while it has already closed its offices in Paraguay.

Commenting, 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.”

Peter Luff is available to discuss the report on 07921 039870. For any other media inquiries call Laura Humble, Select Committee Media Officer, on 0207 2192003/ 07917 488489