Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 1 - Evidence - Meeting of September 28, 2011
OTTAWA, Wednesday, September 28, 2011
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:45 p.m. to examine and report on the political and economic developments in Brazil and the implications for Canadian policy and interests in the region, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: We are reconvened to study our order of reference, which is to examine and report on the political and economic developments in Brazil and the implications for Canadian policy and interests in the region, and other related matters.
Our first witness, here as an individual, is John P. Bell, Director, Goldcorp Inc. Mr. Bell is known to many of us in his varying other capacities.
I think you are well aware of parliamentary rules, Mr. Bell, that when the Senate is sitting, unless we have permission, the committees are delayed until the Senate is adjourned. The Senate has just adjourned and we apologize for the delay in your testimony.
We hope to continue our study and have a visitation to Brazil in the coming months. We hope that we have something to add to the foreign policy debate, both on the trade and on the political side, about our relationship with Brazil.
Mr. Bell, in addition to his present role, was a former Canadian ambassador to the Ivory Coast and Brazil. He also served as High Commissioner to Malaysia from 1993 to 1996, and was a special adviser to the Canadian Minister of Foreign Affairs and head of the Canadian delegation on environment issues during the lead-up to the Earth Summit in Rio de Janeiro in June 1992. Mr. Bell, I remember that; you were also the chief negotiator at that Earth Summit.
In addition, Mr. Bell has been the chief federal negotiator for Indian Affairs and has served on several not-for-profit boards of directors. He is also an independent director of Taiga Building Products Ltd. and is currently chair of the Sustainability, Environment, Health and Safety Committee of Goldcorp Inc.'s board of directors.
That is a very shortened curriculum. Your many other capacities and contributions to Canada should be noted, but because of efficiencies here to get on with your testimony, which is important to us, the floor is yours. Welcome.
John P. Bell, Director, Goldcorp Inc.: I would like to thank you for giving me the opportunity to testify before you about my experience in Brazil. My experience in Brazil has been an ongoing love story for 50 years. I arrived in Rio de Janeiro in 1961 as a crewman on a Norwegian boat.
That was a period of transition following Kubitschek's grandiose building of Brasilia and the introduction of military rule, which lasted for far too many years.
I then returned to Brazil from 1975-79 as Consul General in Sªo Paulo, a small town that was only 12 million then; now it is 19 million. That was toward the end of the military regime when Ernesto Geisel, the president, began a program of "apertura," the opening up of censorship. There used to be nothing but recipes on the front page of the newspaper O Estado de S. Paulo; now there was less and less. People were starting to give their frank opinions and the military was starting to see that the handwriting was on the wall.
At that time Canada had strong interests in Brazil. We had many corporations such as Brascan, Alcan and Moore Business Forms, all employing many thousands of people, but the market in Brazil was quite closed. We were at the end of a military dictatorship.
The one notable event that I might signal during my time in Sªo Paulo was that in spite of currency restrictions, Brazilian Traction, Light and Power Company Limited, known as "the Light," their electrical utility, was sold for $600 million in two U.S. cheques deposited in a bank in New York, and that led to the rebirth of the Brascan that we know today.
I then returned to Brazil as ambassador in 1987. That was when the first non-military president for many years, José Sarney, was there and the first of many democratically elected presidents, starting with Fernando Collor de Mello. It was a period of some trade liberalization, enormous inflation, great poverty issues and so on, but there were some good things that happened with regard to indigenous peoples — the recognition of the right to benefit from the land that they were on.
Another interesting thing that happened was that Brazil, to my knowledge, was the first country that voluntarily repudiated a nuclear weapons program. Under the military, they had a secret program. When Pierre Elliott Trudeau, with two senators — Senator Kolber and Senator Austin — visited the Amazon, the Brazilians took us to Cachimbo in ParÆ State. We were the first significant foreigners to see this huge hole about a mile deep where they were testing nuclear weapons. It was only a year later that Fernando Collor de Mello symbolically covered over that hole and the whole nuclear program was dissolved and made public.
As you mentioned, Canada and Brazil had the opportunity of working closely together on environmental issues at the Earth Summit in Rio de Janeiro.
A deal was made between Canada and Brazil. Canada was anxious to have the conference on environment and development, which would be a decade or more after the Stockholm conference on the human environment, but Brazil and Canada agreed finally that they may have had more votes in the United Nations. We agreed to support them and they agreed to support a Canadian to be head of the conference, the secretary-general, who was Maurice Strong. Indeed, we worked together at the outset of that conference when you were the high commissioner in Kenya and we had our first preparatory meeting there.
Today, I am totally amazed when we look at China, India and China and Russia, in particular, and the dramatic changes. However, the changes in Brazil have been no less dramatic. I think of now six or seven democratic elections, multi-party democracy. I have a quote from The Economist which discusses Brazil's "multi-party democracy coupled with freedom of expression that helps it to negotiate social change, unlike China and Russia." The main changes which are so dramatic from my days from 1961 onwards were that the insoluble problem of debt was solved and debt is now investment grade.
In my times in Brazil, inflation was so rampant that they ran out of presidents, birds and so on to put on the bills because they used them up so fast. If you had a bill for $100 in January it was worth maybe 50 cents or a dollar in six months. Going from 3,000 per cent to a stable inflation rate of 4.5 or 5 per cent is totally amazing.
The other dramatic impact has been the reduction in poverty which, in effect, flows from democratic elections, solving the debt crisis and solving inflation. The rich always were able to cope with inflation. When someone asked Bill Mulholland, the president of the Bank of Montreal, how do you do so well with a high inflation rate of 70 per cent, he said we make 140 per cent profit. The poor cannot do that. They cannot go to the overnight market. As you have probably seen as well, from 2003 to 2008, the rate of poverty has been reduced by 50 per cent, which is dramatic.
Brazil has its problems — its infrastructure problems, land tenure problems and all of those things. However, the Brazil of today is a far different country than it was when I first went there. It is a BRIC country; it is the seventh largest economy in the world and it will be the fifth largest in a few years. The striking figure is that Brazil by 2040 — which is less time than since I began my association with Brazil — will be the second largest economy within the G7, after the United States.
It is obviously important to us. Our relations have always been good, although there have been a few hiccups, as you are aware. Historically, Canada benefited from the cod trade around the time of the creation of our country in 1867. Traditionally the role of the Brazilian Traction, Light and Power has been a huge factor in Brazil.
I was reading not so long ago the memoirs of a journalist from Brazil who was the press attaché to President Getœlio Vargas in the 1950s. I was interested in that he said that every Saturday night, President Vargas went to have dinner with the president of Brazilian Traction, Light and Power, which at that time was responsible for power generation, urban transportation and all of the telephones. Indeed, the Brazilian word for streetcar is bonde. In Portugal, it is called "streetcar." The reason for that is that at that time Brazilian Traction, Light and Power Company floated a bond called the Canadian Mortgage and Bond. Advertisements for it were stuck on the streetcars, and that became the name.
We have had those strong relations through direct investment. The Brazilian economy is opening up. We are both competitors and collaborators with Brazil. It is a balance.
When I review our relations with Brazil and see the hiccups with which I have been associated, I believe that they occurred because we sometimes did not treat Brazil with respect and as equals. They sensed that very much. There were three strong irritants with which I have been associated. The first was a little thing like terry cloth towels, which was blown entirely out of proportion because it happened to be terry cloths from Shawinigan. Jean Charest was the minister in charge here, and the guy making them in Brazil was the head of the textile association. It was blown out of proportion and became a huge issue that we had to manage.
There was the kidnapping of the Brazilian supermarket owner, Abilio Diniz, and amongst the many kidnappers were two Canadians. I was in Fernando de Noronha, a former prison colony, at the time. When I surfaced from scuba diving, someone asked me if I was the Canadian ambassador and said that they were talking about me on TV. It was the night before the Fernando Collor de Mello versus Lula elections. Lula lost and Fernando Collor de Mello won, in some part because of this event.
Those two young Canadians, Spencer and Lamont, were the centre of conflict and irritation for five years or more. Frankly, we could have done it differently.
The third irritant, with which I am sure you are more familiar, is the Embraer-Bombardier conflict over subsidized export funding by Brazil. Incidentally, when I was ambassador I went to see the Minister of Finance and pounded on his desk, saying that he had to provide subsidized export financing for Canadian Steamship Company, which was buying a ship there, and for paper mill machines that were going into the riding of a former prime minister in Alberta.
I was originally invited here about two years ago. Had I come then, I would have spoken about what I thought would enrich our relations. However, two years later they have more or less been done. It is quite amazing what the Canadian government has done. I had a list, starting with the deputy minister group that went, the science and technology agreement, more satellite offices in Brazil, a new air agreement and a minister of trade mission. Of course, the beacon of our seriousness about a country is often whether the prime minister visits. He has gone. We have the CEO forum, greater involvement of the business section and so on, which is terrific.
I would like to make seven short recommendations that I think are important to our relations.
When I first arrived there as ambassador, we introduced a direct flight from Toronto to Brazil. There is a street in New York where 75 per cent of the people come from a little town called Governador Valadares in the state of Minas Gerais. All the remittances come from people living abroad. Five thousand of them came to Canada and threw away their return tickets. We had to do something, so we imposed visas. This has been a stone in our sock. It has caused so many problems. We are falling behind America and Australia. I know that work is being done on finding a way to provide multiple visas. This is very important.
Of course, we have to implement all of the initiatives that we undertook to do. We have to keep up the pressure.
I do not know whether you have had discussions about a free trade agreement. I think this is the next big opportunity for Canada. There are issues here, one being the fact that we can only negotiate with Mercosur, which is a collection of countries in the Southern Cone. Brazil is one of them. Brazil's tariffs are higher than those of the other countries, which is an issue. Of course you are all familiar with our supply side marketing board issue in agriculture.
The number of Brazilians who have immigrated to Canada and are doing well here has gone up dramatically in the last 15 years. We need to recognize and take advantage of that diaspora.
We have a dynamic Câmara de Comércio Brasil-Canada. We have bilateral chambers of commerce in most countries where we have an active trade relationship. The one in Brazil is the only one in the world that is self- financing. The president of the chamber when I was there, Juergen Engelbrecht, who was the president of Massey- Fergusson, wanted to create something called a centre for arbitration where companies who had a problem with Brazil could go. It existed for 20 years before it was used. The law was changed and suddenly it became an opportunity. They are now making enough money to easily fund it.
Speaking bilaterally, Brazil is a very important player. We need to develop a strategy to deal with Brazil on a priority basis in the context of our multilateral associations.
You should visit Brazil, as I think you said you are going to. You have to see it to believe it.
Senator Fortin-Duplessis: Mr. Bell, I would first like to tell you how pleased we are to have you here today. Your vast experience around the world, and specifically your experience in Brazil, is very valuable to us.
I am going to refer to your experience with the Earth Summit. If I remember correctly, you mentioned that you were involved in organizing the Earth Summit. I have two questions. My first question has to do with ecology.
It seems that the Brazilian government does not really pay attention to ecologists. The ecologists were hoping that Dilma Rousseff, once elected, was going to oppose the plans of her predecessor President Lula, who wanted to build the huge Belo Monte dam. They were hoping that she would make environmental issues more of a priority. But the new president gave the go-ahead for building what will be the largest dam in the world. She has also encouraged bioethanol production, which actually contributes to deforestation. And last month, Parliament passed more flexible legislation for small private landowners, who will not have to worry as much about ecology and the environment.
Deforestation has been spreading over the past few months, especially in the States of ParÆ and Mato Grosso. Are you afraid that the deforestation of the Brazilian side of the huge Amazon oxygen tank, will reach unmanageable proportions and endanger oxygen production, which not only affects the Amazon and Brazil, but also other countries?
Mr. Bell: Thank you for your question. That is a very astute observation and a very difficult question.
Brazil was uninterested in environmental issues until they actually hosted the Earth Summit. There are a number of active ministers, including José Goldemberg and others, who persuaded the government they had to be more proactive in environmental issues, particularly in the Amazon and "the lungs of the world," as they call it.
There have been huge issues. Large dams are a very important issue. Another factor is that there has been huge movement in the lands between the Cerrado, which is between the southern parts of Brazil and the Amazon, and the Amazon itself. There has been huge movement from the Cerrado, where they were grazing cattle — and Brascan had a farm with 22,000 cattle — moving into the two states of Mato Grosso and growing sugar cane for ethanol production, growing soya and other crops. This has had an impact on the land use.
There has been huge controversy around the construction of roads in the Amazon. In fact, when you cut down and grow in the Amazon, because of the nature of the soil, it is depleted and you have to brush over it and go on to the next piece of land. It is totally ineffective.
Those are the issues. Those tugs and pulls have been going on for a long time, but particularly since 1992.
I am not close enough to Brazil today to be able to comment specifically on the dam in question. Itaipu was the big dam when I was there, and I wanted to participate in the construction and get some contracts.
At the outset of my remarks I mentioned we now have a multi-party democracy. In the old days, if they wanted to do something, they would go ahead and do it. The tragedy was that then they would have a new military government and would discard one thing, like the steel railway, and start doing something else.
Now, there is freedom of expression. There are active NGOs, so they are undergoing the same oversight that we would in Canada.
It is an issue. I do not think it has been resolved. There is always that balance between environment and development, but I think they are in a better place today than they were 20 years ago.
Senator Fortin-Duplessis: May I ask another question, shorter this time?
Mr. Bell, what fields would benefit from forging closer ties between Canada and Brazil? What would be our sectors?
Mr. Bell: There are many. Brazil, like Canada, is a vast country with many challenges in transportation, communications and natural resources. As I said, we are competitors and collaborators at the same time. The areas of collaboration include mining, resources — and we have many acquisitions and mergers in this sector — and transportation, despite the conflict between Bombardier and Embraer. Embraer was Canada's largest client. They used to buy engines from Pratt & Whitney. They also collaborated with other companies. Embraer and Bombardier work jointly with OECD and ILO, the International Labour Organization, in order to establish common transparency standards for air cargo.
There are also many opportunities in agriculture, real estate and communications — where there are a number of Canadian companies — tourism and education.
In terms of education, Canada is one of the major destinations for the learning of English as a second language. In fact, most Brazilians who live in Canada and are Canadians, came here first to learn English. So we have a wide range of possibilities in the university sector. If I understood correctly, the Governor General is actually going to send a mission to Brazil next year with a number of Canadian university presidents. The list goes on; there are all sorts of opportunities. It is a matter of going there and of finding reliable partners.
Senator Fortin-Duplessis: Thank you very much. So there are many sectors. That is very interesting.
Senator Finley: Ambassador, welcome. I have been in Brazil a few times but not in recent years.
I wonder if you could expand a little on the subject of Mercosur. What impact would that particular agreement have on Canada's developing a free trade agreement with Brazil? Could you expand a little on the actual impact of Mercosur and Brazil's role in it?
Mr. Bell: Brazil, like Canada, has often seen its relationships on a commercial and trade basis in relation to the United States. A foreign minister once told me that the closer you get to the United States, as a Latin American country, the more preponderant is the amount of trade with the United States. Like our old third option, we do want to reduce our dependence on the United States. The concept of Mercosur, which started in 1980s, is to bring those countries — Argentina, Uruguay, Paraguay — together and have a free trade agreement, but not a common external tariff. Brazil's tariff is higher than most of the others.
I remember that all of the people in the southern state of Rio Grande do Sul where the big wine growers are said, "Mercosur will be the death of us because the Argentineans and the Chileans, if they are in Mercosur, are going to wipe us out." In fact, that has not happened.
As you know, we cannot negotiate directly with Brazil. Mexico can negotiate because it was grandfathered, which allowed it to have direct negotiations prior to Mercosur.
I think it will be more problematic in negotiating a free trade agreement. I must say it is not my area, so I do not have a definitive answer. I have spoken to people such as our ambassador. Part of the problem is if the other countries in Mercosur are cautious of having a free trade agreement with Canada because they see that they would have to increase their tariffs towards Canada, and their tariffs are already lower than Brazil's.
One approach might be to focus on perhaps more sectoral free trade. We talked before about the Bombardier- Embraer difficulties, and it was to have a sectoral free trade in transportation. We are now doing well in urban transportation. Bombardier has broken into the market and they have a major contract with the Sao Paulo subway. There is also the area of communications. There are some areas that might be one way of doing it. I believe we are at the initial stages and I think the negotiators are aware of that issue and they are also aware of the issue of Brazil and Argentina — Brazil is the largest exporter of poultry in the world — and they see our supply situation here. I hope that answers your question.
Senator Finley: It was more the difficulties that we created because of the different aspects of Mercosur in terms of tariffs, for example.
I would like to go to one particular sector, which is the aviation sector, and my question has several parts. First, what is the condition of the Brazilian air force? Second, recognizing that Embraer did buy Pratt & Whitney engines from Canada, we have to be reasonable and respect the fact that Pratt & Whitney are basically the dominant player by far in that particular kind of engine. The Brazilians, to the best of my knowledge, have never bought Canadair Challenger or Canadair Regional jets, whereas Air Canada invested billions of dollars in Embraer's airplanes.
We are trying to continue to develop and expand our aviation product. We are involved in the production, development — despite what my friends across the other side of the table may say — and design of the F-35 stealth fighter jet.
Would there be a genuine openness on the part of the Brazilian military — because as far as I know they are not in as part of this consortium — to deal with Canada directly on this, to help develop Canada's aviation and aerospace infrastructure in the way we obviously did with Embraer?
Mr. Bell: I do not see any reason that could not happen.
I do believe the Brazilian air force at one point had some Canadian aircraft. I think they had Buffaloes in the 1970s, if I am not mistaken.
Senator Finley: Perhaps in Orville Wright's time; it was a long time ago.
Mr. Bell: I have my own thoughts on Bombardier, with whom I worked closely in New York, for instance, when they got their first major contract with aggressive export financing from Canada, when Richard Ravage was head of the MTR. That was the largest single contract. Of course in Malaysia I worked with them. We got a $1.4-billion contract for the light rapid transit system. I worked with them and I have the highest respect for them. However, with regard to the regional jet, the Bombardier plane was the extension of an existing model and the Embraer was a new plane built for a specific market and therefore had some attractiveness to Air Canada. That is why they bought it.
We should have been doing what you are suggesting; maybe having better ties with Embraer earlier on in the piece. You look at major aircraft construction now and the new C series at Bombardier; it is all international. It is a Canadian plane but the wings are made here, the fuselage here, the interiors there and so on. Yes, I think we should be more aggressive and find creative ways to work with the Brazilians and get some of their business.
Senator Downe: In your opinion, as the Brazilians move from the seventh largest economy, and you indicated in your presentation they will soon be the fifth largest, where do you think they see themselves in the region and what opening if any there is for Canada? I am particularly interested in the formation of the Union of South American Nations in 2008 and, more recently, where Brazil was the leading force in forming the Community of Latin American and Caribbean States, which seems to be, from a Canadian perspective, a direct attack on the Organization of American States where we were involved and we are not involved in these associations. Is that a major problem for us?
Mr. Bell: Well, it is interesting that you look at Brazilian foreign policy. It has been, in a way, what we would call floating to the left in terms of its relationship with Venezuela and even Cuba on the one hand, and a conservative, well- managed fiscal and monetary policy. I believe, under the Lula days, he was on the one hand taking into account the concerns of that particular part of his party while, on the other hand, doing what was best for the country in terms of fiscal and monetary policy.
There has been a bit of, again, anti-American theme, perhaps, of Mercosur, of this rather interesting association of Brazil, South Africa and India, which are the three democracies on the three continents, and other regional issues, and that is right. Where are we in that? Are we left out? If we can negotiate a free trade agreement with Mercosur we are not left out at all. If we were able to beat the Americans we would be in a preferred situation.
The fact they have associations that are more Latin, which makes sense from their point of view to my mind, I would not worry so much about not being part of as long as we were participating in a way that met our interests, and if we met our interests it would obviously have to meet theirs as well.
Senator Downe: In your opinion, how important is OAS and Canada's participation in that?
Mr. Bell: That is an interesting situation. For years I could not figure out why Canada was not a member of OAS. We could not be a member of the OAS because we would be doing what the Americans told us to do. One day, the industry minister in Rio de Janeiro came to see me and said, "Mr. Ambassador, Brian Mulroney has invited me up for his fiftieth birthday because I was the president of the iron ore company here and Brian was the president and we are great friends. Is there anything I should say?" I said, "I do not understand why Canada is not a member of the OAS." He went up, and I was speaking with Louise Fréchette just a couple of months ago, and it was exactly what happened; they were negotiating and so on, and the Prime Minister's Office said that we should join the OAS, so we joined.
Is it good? Yes, I think it is good. Is it all that strategic? One of the concerns was whether we wanted to get involved in squabbles between Ecuador and Bolivia and so on. We do not, but it is an important forum.
My corporation, Goldcorp, of which I am a director, has a mine in Guatemala. The Inter-American Human Rights Commission has sent a precautionary note to Guatemala saying we should shut the mine — 800,000 ounces a year. Why? It is a long, complicated thing but fortunately, through Canada's association with the OAS, and their help and involvement, we have been able to get that straightened around to everyone's advantage, including the Guatemalans.
There are some practical reasons for our membership in OAS. You could ask the same question of the Francophonie and the Commonwealth I guess. We are just joiners and it does some good things. Senator De Bané mentioned that Jean Chrétien said his closest friend was another former leader of Brazil, Henrique Cardoso.
From that point of view, it is good; it broadens and deepens our relations. That should never take away from where our real drive should be, which is dealing with the Brazilians head on.
The Chair: Mr. Bell, I want to follow up on what you said that perhaps in Lula's time, in spite of an apparent movement left towards Venezuela, et cetera, you said the key was the free trade regime. With Mercosur, many people say, "Do not touch it; you cannot break it." More recently, people are saying if you can point out the advantages and disadvantages of the present system and show them an opportunity that is better than that, why would it not be to the advantage of all the countries within Mercosur and Canada? Strategically, that is where we could be going. That seems to be echoing around the experts that we have heard and things that I read.
On the Lula side, he seemed to have started out with, "I will be different," and perhaps that got him more to Venezuela and Cuba, certainly in his last number of years. I see President Rousseff saying, "We are an international player." More and more, they are strategically saying, "We are not there in a geographic area or in an ideological mindset; we are significant." You say they will be fifth, so they want to be at the UN Security Council table and to be factored in on any issue.
If that is what I am hearing from Brazil, what should Canada be doing with Brazil on the political side of our development, taking into account that they are now being significantly factored in by other countries around the world? Whether we are talking about the Iran issue, the debt restructuring or Security Council initiatives, people are starting to factor in Brazil. How should Canada switch in its multilateral situation to take into account Brazil?
Maybe as an addendum, we seem to have taken it as our South American neighbour rather than an international player of note like China, Europe and the United States.
Mr. Bell: This was the last of my points going forward; namely, we obviously have to have a vigorous bilateral relationship with Brazil. We played a role in the creation and helping in the creation of the G20. Brazil is there as a leading spokesperson. We should have a strategy of working with Brazil on international issues through international organizations, be it the G20 or the United Nations or whatever. I agree entirely with that.
How do we do it? Part of it is that we are talking about these different organizations. One of the things it does is it gives our leaders, ministers, bureaucrats and businesspeople more time to interact. Once you have that close relationship, then it is almost, "By the way, today we are talking about the global financial crisis and tomorrow we are talking about bilateral relations," and so on. However, that relationship is there. It should be multi-faceted, and it should take into account the new and enhanced position that Brazil has on the world stage.
The Chair: Do you believe this positive development of Brazil will continue, or will internal deficiencies in their own structures and things that people are noting perhaps were overlooked in previous times will come to the fore with this president, such as internal dynamics on taxation, restructuring, infrastructures, et cetera? Will they be able to continue a positive trend?
Mr. Bell: There are huge issues that cannot be swept under the rug with Brazil. They are now a world-leading commodity supplier, and they do not have the ports. The big companies, like CSL, the steel company in Bali and the commodities market, have their own railways because the government has not been able to provide them. There are these infrastructures, these questions of land tenure and the social issues that, in spite of the reduction in poverty, are still glaring.
Provided they retain and maintain a multi-party democratic system, it is that quote from The Economist that says because of that and because of free press and freedom of information, their system will be guided and they will make adjustments socially and so on, like the senator mentioned about the dam, because of this democratic process that India and Russia — if Russia is now going to have its winter games in Sochi, they will move mountains and everything else, and they will not ask anyone about it. They cannot do that in Brazil any longer.
There are all sorts of risks, for sure. Brazil has had good governments and bad governments in the past. My view is that the structures are in place so that things can get progressively better rather than worse, and all those issues of corruption, inefficiencies in government, entitlement and so on will slowly change.
Senator Mahovlich: Could you enlighten us on the Brazilian military? What is their budget? As compared to Canada, I do not see them on the world map, let us say in Afghanistan. Canadians are there, but I never see Brazil involved in the world problems we have. Is their military effective?
Mr. Bell: I think they are. The military in Brazil is a very interesting situation. My friend from Bangladesh said once, "John, look at India; they are having skirmishes with almost every one of their neighbours about this or that. You look at Brazil; except for the long-ago war with Paraguay, they have no conflicts." That does not mean they have a weak or ineffective military. In fact, the military ran the country for 30 years and took a lot of the resources. They have been active internationally, and with the lead role they played in Haiti, they were exemplary.
You mentioned the air force. I think their air force, army and navy, which I had a fair bit to do with when they had our navalists down there, are very professional. I think it is good that they are not having wars.
Senator Mahovlich: Right.
The Chair: Mr. Bell, we have come to the end of our time, unfortunately.
You indicated that you were called two years ago. Perhaps we should have pursued you more vigorously at that point in time because you have set the stage in the directions of both the economic issues that we wanted to tackle on a bilateral basis and the political. Again, you have lived up to your reputation. You have added value to our study, and we thank you. We may call on you for any specific issues at a later date, but thank you for your appearance here today.
I am turning to the next panel now. We thought that, since the Minister of International Trade and our Prime Minister both made visits to Brazil as we had been studying the issue, it would be important to be brought up-to-date on the content of those visits and some expected follow-up. What we need, not having been part of those delegations, is an update on the objectives of those visits and the details in a summary form. I am sure that the senators will have some questions.
Before us we have two officials of the Department of Foreign Affairs and International Trade: Neil Reeder, Director General, Latin America and the Caribbean Bureau, and Susan Harper Director General, Trade Controls and Technical Barriers Bureau. Welcome to the committee. I think you know our process. You can have opening statements and then we will go to questions. Normally we cut off at 6:15. We can go just a touch later than that. That gives us about half an hour to 40 minutes. We will try to accomplish our objectives within that time. Welcome to the committee, Mr. Reeder.
Neil Reeder, Director General, Latin America and the Caribbean Bureau, Foreign Affairs and International Trade Canada: Thank you very much. It is a pleasure for Ms. Harper and me to be with you today. I will make some brief remarks and then take some questions.
We are pleased to see you continue your study of Brazil. I also understand the committee is traveling to Brazil in the next couple of months. We do hope you go.
The Chair: We make plans, but our destiny is controlled by the Senate, so we will complete our study and consider the appropriateness and the availability of funding to travel to Brazil. It is an expectation, I know, from the other side, but we cannot definitively say that will happen. Our study will be as we can accomplish it, whether we have to do it from Canada only or otherwise.
Mr. Reeder: If you do go in the end, we are pleased to offer the support of our diplomatic missions in that country.
In dealing with Brazil, we are engaging with a country that is an economic powerhouse by any measure. As you heard from Mr. Bell, this is an economy that has now surpassed the size of Canada's. The International Monetary Fund, IMF, expects that Brazil will be the sixth largest economy globally by the end of the year. It is the fifth largest country in the world in terms of land mass, and with nearly 200 million inhabitants, the fourth most populous democracy in the world. Its global influence is asserted bilaterally and also regionally and multilaterally through organizations based on the principles of non-intervention, dialogue and diplomacy. Brazil is truly a key international player. It is also a fully functioning democracy. All elections since the 1990s and the end of the military governments have been peaceful and transparent.
Since my last appearance with Mr. Jon Allen, our assistant deputy minister, two major visits have been undertaken, as the chair mentioned. I would like to update you on those two visits.
This past June, the Honourable Minister for International Trade, Ed Fast, stopped in Paraguay on the way to Brazil on his first official visit abroad. The Minister announced the launch of exploratory trade discussions with Mercosur, of which Brazil is a member.
Minister Fast then led a 19-company trade mission to Rio de Janeiro and to Sªo Paulo with two objectives: firstly, to reaffirm the importance of this bilateral relationship, as highlighted in our Global Commerce Strategy and Americas Strategy, and secondly, to work on behalf of the Government of Canada and Canadian workers and companies to strengthen commercial relationships in the fast-growing markets of the Americas and Brazil specifically.
Infrastructure requirements are vital to ensuring the demands of Brazil's booming economy are met. Brazil will host the FIFA World Cup in 2014 and the Olympic Games in 2016. These events, along with the Brazil government's Growth Acceleration Program, worth US$805 billion, offer a broad range of business opportunities for Canadian companies. In turn, they create jobs at home in Canada.
Meeting with counterpart ministers in Brazil, Minister Fast confirmed the main thrust of our commercial engagement with that country: integrating our global value chains to increase our competitiveness, both in Brazil and globally, emphasizing the importance of science and technology in education as part of the commercial agenda, and beginning and maintaining momentum on exploratory discussions with Mercosur.
Minister Fast came away very enthusiastic about the breadth and depth of our commercial engagement with Brazil. He recognizes the untapped potential for Canadian business and the need to catalyze our respective private sectors. He commented after the trip that "Brazil is a priority market for Canada where we wish to further develop our dynamic, wide-ranging and multi-faceted trade relationship. We recognize the importance of Brazil as a major economic player and a strategic partner for Canada globally, regionally and bilaterally."
Here in Ottawa there is also a great deal of interdepartmental support on the Brazil file. It is really a whole-of- government approach. Tomorrow, for example, we have an interdepartmental meeting on the way forward with Brazil after these visits. We expect over 20 departments and agencies to be around the table. Each of them has a web of networks and engagement with Brazil. It is really quite impressive.
Only two months later, from August 7 to August 9, Prime Minister Harper visited Brasilia and Sao Paulo as part of a four-country Latin American tour that included visits to Colombia, Costa Rica and Honduras.
In Brazil, the Prime Minister was accompanied by an unprecedented delegation of four Ministers: Minister of Foreign Affairs Baird, Minister of International Trade and Minister for the Asia-Pacific Gateway Fast, Minister of Public Works and Government Services and Minister of State for Status of Women Ambrose and Minister of State of Foreign Affairs (Americas and Consular) Ablonczy.
The delegation included six stakeholders from business and academic communities, one MP and a large contingent of Canadian journalists.
During the meeting between Prime Minister Harper and Brazilian President Dilma Rousseff, the two leaders reaffirmed that Canada and Brazil will enhance their bilateral partnership based on common objectives of enhancing and promoting democracy, human rights, social inclusion and sustainable development. Both leaders underscored the long-term and healthy trade and investment relationship, agreeing however that, given the potential between our two countries, more could and should be done.
Beyond the traditional industries of mining, energy and agri-food, President Rousseff called for partnerships in S&T and innovation, the exploitation of Brazil's deep water oil reserves, high tech and infrastructure leading to the Olympics.
President Rousseff considered the creation of the CEO Forum as a catalyst to bring our private sectors closer. The forum will provide private sector advice on strategic priorities to advance the bilateral relationship and strengthen international competitiveness. President Rousseff announced Vale CEO, Murilo Ferreira, as Brazil's Co-Chair. Prime Minister Harper announced Scotia Bank CEO Rick Waugh as Canada's Co-Chair. Additional members will be announced in due course.
Following the expanded bilateral meeting, Prime Minister Harper and President Rousseff presided over the signing of four key agreements and MOUs: the Air Transport Agreement, which is an open skies agreement that will facilitate flights to and from each country, promoting trade, tourism and educational exchanges; the Social Security Agreement, which will create a coherent benefits and pensions regime for individuals working between both countries; an MOU on development cooperation that envisages a development policy dialogue and eventual collaboration between the two countries on joint initiatives in third countries; and an MOU on Olympics cooperation that will provide a framework for sharing best practices from Canada's Vancouver-Whistler experience while fostering infrastructure opportunities in the context of Brazil's preparations to host the Olympic and Paralympic events.
The two leaders of Canada and Brazil also launched a strategic partnership dialogue. Our respective foreign ministers will meet yearly to discuss key regional and global issues. We expect to see the foreign minister of Brazil in Canada during the first half of 2012 as part of that agreement. Both leaders expressed support for the initiation of exploratory talks between Mercosur and Canada, intended to allow both sides to gather information needed to assess how best to enhance their trading relationship. There was also agreement on an energy dialogue and a confirmation of interest to work towards the removal of unnecessary barriers to bilateral trade of agricultural products.
The two leaders signalled the strategic importance of the new Canada-Brazil Joint Committee for Cooperation on Science, Technology and Innovation, and Education. They agreed on the development of an action plan focusing on the research, development and commercialization of joint projects. They agreed to initiate a space cooperation dialogue to explore possible avenues for cooperation between the two countries in the use of outer space for peaceful purposes.
The leaders took note of progress in the bilateral dialogue on defence issues. In that context, they reaffirmed our interest in political military conversations, which will take place in Ottawa next month. It was agreed to negotiate a legal instrument to provide a framework for Brazil-Canada cooperation on defence. On Haiti, the leaders reaffirmed their commitment to help the Government of Haiti maintain stability, strengthen democratic institutions and promote the long- term development of Haiti. Both countries worked collectively to support Haiti through MINUSTAH, which is the United Nations Stabilization Mission in Haiti, whereby Brazil provides military leadership and Canada provides police leadership, deploying 150 police officers, 25 correctional officers and 10 military officers into the MINUSTAH force.
The Prime Minister congratulated the President of Brazil on her new scholarship program that will allow 100,000 Brazilians to study abroad. The Prime Minister emphasized the strength of the Canadian education systems. The number of students and tourists from Brazil coming to Canada has increased substantially. Canada hosted over 2,000 full-time students from Brazil last year in addition to thousands more part-time language students coming to Canada primarily to study English.
In addition, we welcomed over 72,000 tourists from Brazil last year, which contributed significantly to our economy. That figure was a 30 per cent increase over 2009. The Canadian Tourism Commission has identified Brazil as a priority market for attracting tourists to Canada. The Prime Minister also announced facilitating tourism and business links with the opening of three new visa application centres in Brazil. These will facilitate the process of applying for visas and help to make Canada a preferred destination.
The Prime Minister announced that the Governor General of Canada, as Mr. Bell mentioned, will lead a delegation of over 20 Canadian university and college presidents from the Canadian Association of Universities and Community Colleges to Rio de Janeiro in April 2012 to attend the Conference of the Americas on International Education.The two leaders expressed their support for the adoption of the declaration of principles on the Open Government Partnership launched last week at the United Nations General Assembly. They reiterated their intention to work closely in preparation for Rio+20 United Nations Conference on Sustainable Developmentto be held in Rio de Janeiro in 2012, 20 years after the initial meeting.
In Sªo Paulo the Prime Minister addressed a high-powered political and business audience over lunch, speaking of the need for increased ambition in our bilateral relationship. He relayed a positive message to the Brazilians that we admire Brazil, see Brazil as a partner and want to enhance our relationship with Brazil on the modern fundamentals of knowledge-based innovation and global value chains. Visits by the Minister of International Trade and the Prime Minister have re-launched this relationship with Brazil at both the trade and political levels.
I hope my brief remarks have given you some insight into the current state of the relationship between Canada and Brazil. I look forward to answering any questions you may have.
We have copies of the joint statement from the Prime Minister's visit to Brazil and the Prime Minister's speech in Sao Paulo for the record. Thank you very much.
The Chair: Thank you. Will you file those with the clerk of the committee? Moving to questions, we have to be efficient.
Senator Downe: Canadians might be curious as to why an economy that is larger than ours is receiving funding through CIDA for its development. In your opinion, is that a significant area where we should invest? Does it help with trade?
Mr. Reeder: I cannot speak in detail to the nature of that collaboration. Some of it may be regional programming. Obviously, Brazil is not a country that would receive bilateral development assistance because of the size of its GDP. In fact, Brazil is now becoming a donor. However, there may be some small program but I would have to get back to you on the nature of it. Generally speaking, Brazil is moving much more into a donor role. We are hoping to share best practices with Brazil as it becomes a major donor and to explore possible projects in third world countries, given their interest in working with Canada in that sector.
Senator Downe: Given all the efforts made and the profile that Canada is trying to develop with Brazil, are you concerned that Brazilians have other priorities and Canada is much farther down the list than we would like to be? Obviously, they are interested in their own region and in South America. However, we also see them forming alliances with Turkey, Egypt and India on specific issues where Canada is excluded. The new organization that Brazil was a leading force in forming, the Community of Latin American and Caribbean States, excludes the United States and Canada. It is a parallel organization to the Organization of American States with one difference: Canada and the United States are not involved.
I also understand that China is making a significant investment and that the Chinese government has offered to build a headquarters for this new community of Latin American and Caribbean states, which excludes the United States, which is probably the target rather than Canada.
What efforts are the Brazilians making compared to what they are doing in some other countries?
Mr. Reeder: I would say, senator, that the optic on Brazil has to be very much as an equal partner. As you say, they are active regionally and multilaterally. There must be a shift in the perspective on Brazil in Canada as well to appreciate how important and big a player Brazil now is. I am not sure Canadians fully understand that. We certainly do in terms of our government's approach, given it is a priority for us in the Global Commerce Strategy and the Americas Strategy.
We are treating them as an equal partner, as a major player, as an important destination for our direct investment and trade, and, as I mentioned, across a range of areas.
Brazil also likes to work with us because they see Canada as a North American partner that is neither the United States nor Mexico because, in the case of Mexico, you will often see rivalries for leadership in the region. The United States is a whole different issue. They enjoy working with us. They see many areas where they can learn from us because we have attained a certain international multilateral profile that they can also learn from. At the same time, they understand the importance of our investment in their country, our interest to engage with them on that score.
It is an open door and we have moved beyond an epic of bilateral irritants. We are now able to deal with those so they do not contaminate the larger relationship. We may have differences in aerospace and such, but we are now comfortable, especially after this visit, that we want to move forward across a range of files and we will manage the differences when they arrive, as we do with the United States and other countries.
In that respect, I think the door is open and both sides are pushing and seeking to advance the relationship.
With the Community of Latin American and Caribbean States, our position is that regional organizations that involve only the Latin American countries and/or the Caribbean countries are fine. That is a decision of those countries to take, if they wish to organize themselves regionally.
We see them as complementary to the big multilateral organization, which is the OAS. Our first priority is that relationship and our work within the OAS because the OAS is truly comprehensive. It brings in everyone, including Canada and the United States, and now Cuba. Since the summit of the general assembly several years ago in Honduras, Cuba was invited back to the OAS. Cuba chose not to, but nonetheless that door is open. It is the only truly representative body. We will continue to place our priority on the OAS. We see these other organizations as complementary. To be fair, there is always a sense in the Latin affinity that they like to interact with themselves. They do not necessarily always want the United States in the room. There is a different perspective than we would have from North America.
We have already highlighted to them that new regional organizations are fine but we would not mind having debriefs from them and learning what their issues are; we appreciate that we will not be at the table.
Senator Downe: This visa must be a major problem because the population of Brazil is 190 million, and we receive 72,000 visitors out of a population of 190 million, and 2,000 students, which I assume is at the very low end of the students. There must be 10 or 15 countries ahead of us that get a lot more than 2,000 students.
Mr. Reeder: In addition, there are the part-time students, which are 10,000 to 12,000 per year.
Senator Downe: Again, though, out of a population of 190 million, we would be in the low end. We have opened these additional visa centres. What other steps are under consideration to rectify this problem?
Mr. Reeder: The visa centres are important because they are kind of a pre-screening function. They do not take the visa decision but they screen documents, make sure everything is ready, and then direct the requests to the embassies and consulates. What we are seeing already with these new centres in the region generally is that they are speeding up the process of application and that when the embassy gets the application it is ready. There are not papers missing and things like that. That is certainly helping.
In the case of Brazil, and I would prefer to have Citizenship and Immigration Canada, CIC, speak to this more directly, we are facilitating multi-entry visas now, especially for business people, so that business people coming in can get a multi-entry visa. If you are a Scotiabank employee in Costa Rica, where we are the biggest private bank, there is no reason why you should have to have a single-entry visa. You are credible; it is a credible company; so we are trying to facilitate traffic in that respect.
In the case of the students, if you are studying under six months the medical is waived and this sort of thing, so we are trying to facilitate them.
We are very conscious as a government, speaking as a civil servant, as we travel around the region, of the need to continue to facilitate legitimate entry of travellers. On the one hand, we are advancing mobility in goods, services, people, students, tourists, and on the other hand we have the visa requirement. We want to make sure that it responds to this flow. I know our ministers are conscious of this from our last visit to the region. I think we are making progress. The trade agenda, which we have not talked about, throughout the region is really growing in the Americas. We now have 20 agreements under negotiation or completed with 20 countries in the Americas. That will imply business trade and business traffic, so we have to respond to the agreement by ensuring that legitimate business travellers have access to Canada.
Senator Johnson: Brazil is an incredibly interesting country. What Canada is doing to build our relationship is important.
I was very interested to read what you said about President Rousseff calling for partnerships in other non- traditional areas.
Can you elaborate on the exploitation of Brazil's deepwater oil reserves and also the high tech? How would our partnership with them evolve in terms of the oil reserves, and what is the extent of their reserves?
Mr. Reeder: What we have seen in Brazil, and I do not have the actual numbers of what is out there, is that they have found significant reserves but in very deep water, where they have no direct capacity or experience in that sort of work. We do, obviously, through Hibernia and in Nova Scotia. Part of that conversation will be to see whether we can generate areas to work with them and share technology, and also open the door to oil and gas contracts down the road. We have expertise to share with them as they face this challenge of significant reserves but in very deep waters.
Senator Johnson: Are they doing anything now?
Mr. Reeder: They are just beginning to identify blocks.
Senator Johnson: How far are they offshore?
Mr. Reeder: I am not sure, but they are very deep. They call it pre-salt, which is way down. That is a problem for them from a technological point of view.
Senator Johnson: They want to move on this front, do they?
Mr. Reeder: They do.
Senator Johnson: How are they doing in terms of high tech? They seem to want more cooperation from us in that respect.
Mr. Reeder: Yes. In terms of science and technology, we have committees and we will move on that.
We have to take this substantive list of areas of cooperation at the government departmental level, expand it and farm out duties, which begins tomorrow with the meeting we have. We have Agriculture and Agri-food Canada and Industry Canada at the table, so there is a good range of players.
Senator Johnson: It is in this respect that I believe you can build a relationship with this country. You build on the resources, the things that keep the economy going.
Is there anything you can comment on in that respect?
Mr. Reeder: No, I think those are legitimate areas of cooperation.
Senator Johnson: We can really have an input, because they are an equal partner with us now.
Mr. Reeder: It does not have to be just government-to-government. It can be driven by the private sector as well.
Senator Johnson: They set up the CEO forum to bring more insight to Canadians about the fact of this country being an equal player, which I do not think is very much on the radar of most Canadians now.
Thank you for your presentation. I think you did a very good overview.
Mr. Reeder: As the senator mentioned, Brazil plays under the radar in Canada still. Mexico, 15 years ago, was in that situation and now it is a major partner of ours. Putting aside the questions of violence and all that, it is now central to Canadians' understanding because of trade, investment and tourism, et cetera.
Brazil is coming but it is not there yet. We have a requirement as a government to ensure that Canadians know the opportunities. That will be part of the responsibility of the CEO forum.
The Chair: I will ask senators to put their questions crisply, as well as the answers from witnesses, as we are running out of time. I regret that, but it is always a problem in these committees.
Senator Fortin-Duplessis: Mr. Reeder and Ms. Harper, I am pleased to see you here. In his remarks, Senator Downe talked about the relations between China and Brazil. As you know, China has become Brazil's number one trading partner, and China's share in Brazilian exports went from 6 per cent in 2008 to 17 per cent today. Without China, I believe Brazil would not be in a trade surplus, but in a deficit of 4 per cent.
Because of the nature of the situation, some go as far as saying that Brazil is one of China's derivative markets. What do you think about that? Can it undermine the very close relations that we want to establish between Brazil and Canada in the future?
Mr. Reeder: I would say that we are not competing with China, but that we have to acknowledge that China has a very active presence across Latin America, especially in investments. It is not just in Brazil. We can see its presence everywhere, even in Canada. It is more a question of recognizing that Brazil is looking for export markets outside the United States. Like us, Brazil is looking for other markets, such as Latin America and Asia Pacific, rather than just staying with the United States. In this respect, we have more or less the same objectives as the Brazilians.
The Brazilians want to attract Chinese investment to their country, but they also have some reservations as to the impact of the investment and the whole issue of social and corporate responsibilities. Are all those countries going to recognize and uphold labour rights and ensure environmental protection in their investments? That is what we are asking of our investors, especially in Latin America, in the mining sector, for example.
It is an interesting question since a number of parallels can be drawn between Canada, China and Brazil. I do not see that as competition. Brazil's market is large enough for everyone. Canada is well positioned as a North American partner, and I feel that there will be many opportunities for our country in the future.
Susan Harper, Director General, Trade Controls and Technical Barriers Bureau, Foreign Affairs and International Trade Canada: I would like to add a few words. I am here because I am responsible for the discussions on international trade. My title does not indicate so clearly, but that is why I am here, specifically to answer your questions about trade relationships.
It is important to bear in mind that China is still looking for commodities in Brazil. That is not our economic interest. Canada, just like Brazil, is strong in a number of commodities. I think that our interests lie in value chains. We are not exactly the same type of economic partner.
Senator Fortin-Duplessis: We are not competing with each other.
Senator Wallin: The timing is good because I am asking for a summary comment or characterization. We have Canada, the developed country but small; Brazil, large, developing and moving at lightning speed; and the irritants you have noted — the national egos we are both aware of as countries.
Do you think that because of the leader's visit the psychology has changed, the mindset has fundamentally changed? We felt there was resistance there. Is that gone? Have we moved the goal post?
Mr. Reeder: I think we have. We had great respect for President Lula, but we did not get him here on a bilateral visit. It worked but not as well as it should have.
I did not mention, in terms of this visit, that our Prime Minister invited the Brazilian president to Canada next year and she accepted. In fact, all four leaders on this trip were invited to Canada and all accepted. In 2012-13 we will see visits of all these leaders — Brazil sometime in 2012.
The personal dynamic, from what I saw as an official from a certain distance, was very positive. The president of Brazil has a great interest in expanding the relationships with Canada. She is very interested in our experiences across a range of issues quite apart from trade and investment. I think we have turned the page in terms of the high-level dynamic. The fact that four ministers were on this trip also reflects the priority of our government for that relationship.
The Brazilians have also turned the page. They said Canada is an important relationship for us. They are in North America. They are not the United States. They are not Mexico. We can work with them. Let us put the disputes over here. We will go to the WTO or wherever we have to go to manage them, but let us not contaminate what could become an even bigger relationship.
We are seeing no resistance in any sector with that government. On the contrary, you can see the list of areas of collaboration. I believe this relationship will just mushroom in the next five to ten years.
The Chair: Regrettably we were squeezed into a time difficulty, but I think you have adequately covered what we wanted to hear about the trips and the delegations that went down.
The menu was quite extensive. One of our preoccupations will be how we can further all of those signals that are positive and be assured they are turned into action. It does not mean we will sign a trade agreement, but what will we really do and turn it into? Our concern is to ensure our study contributes to getting something done on the ground that is of benefit to both countries.
I think what you have laid out for us is that we have turned the page in our attitudes toward each other, and now how do we capitalize on it? I hope our study and contributions will add to the solutions in those areas.
Thank you for coming and using shorthand in your testimony. Perhaps Ms. Harper got short shrift on that, but I think we can come back to you if we need more details. You have certainly given us what we needed as a broad base to build on.
Senators, thank you for cooperating. We have done it. We will adjourn on time and not pre-empt the next committee that is using this room.
(The committee adjourned.)