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Latin America

My Lords, I thank the noble Viscount for initiating this debate today and for the excellent speech that he has just made in introducing our discussion. Between the noble Viscount’s departure and subsequent return to this House, we have missed his valuable contributions to foreign policy debates on Latin America. His knowledge and his expertise—what he described as his passion—are born of a vital and vibrant interest in that part of the world, an interest that is grounded in extensive contacts and regular dialogue at a personal level. He is always interesting and provocative, and he did not disappoint us today. For any country, economic health is vital to political stability and well-being. Most countries in Latin America have recognised the importance of trade and investment in securing that stability. So I shall concentrate my remarks today on the trading relationships with Latin America and ask the Minister how he perceives those relationships developing. There is a variety of co-operation agreements between individual countries or groups of countries and the European Union. Most of them are based on three pillars: economic co-operation; institutionalised political dialogue; and the strengthening of trade relations. All those agreements, be they through Mercosur and the Andean Community, or with central America, are important, but perhaps I may ask the Minister first about the role of Latin America in the World Trade Organisation talks on the Doha development round. When the EU Commissioner, Peter Mandelson, visited Argentina, Brazil and Chile at the end of March, he concentrated on trying to build an alliance between those countries and the European Union for WTO talks. Can the Minister update us on whether Mr Mandelson had any success, either in drawing Latin America’s position as a whole closer to agreement with the European Union, in dealing with some of the evident bilateral problems—for example, disagreements over intellectual property between Brazil and Chile—or in addressing issues surrounding direct foreign investment elsewhere in the region? Many international companies have a presence in the Argentinian market, for example. The UK is the sixth largest investor, with roughly 5 per cent of the total foreign direct investment. Moreover, more than 30 top UK companies have investments in Argentina. If these investors are to sustain their position, they need more certainty, but the attitude of the Argentinian Government is at best ambiguous. They know how desperately their country needs foreign direct investment, yet their president encouraged a blockade against Shell in February 2005 and several foreign investors have international arbitration claims outstanding. That position appears to be very different from that which prevails in Brazil, where the UK is also a leading investor. In the past few years, we have seen British Gas in Sao Paolo, Glaxo in Rio and Pilkington in Sao Paolo, as well as the very welcome recent announcement from ICI of investment plans for up to $50 million. Brazil has made some real progress, under both the previous and current administrations. Does the Minister believe that this opening of its economy is the dominant economic driver in the region, or that the more restrictive and difficult investment climate in Argentina is more appealing to its Latin American neighbours? Unless these issues around foreign direct investment are resolved in the region, the impact on the WTO negotiations could be serious. What is the Government’s view of the role of Latin America in those discussions and the role of Brazil in championing developing countries? Is that role realistic in view of the fact that Brazil will shortly be the 10th largest economy in the world and not remotely comparable to some of the poorest countries in the world that it claims to represent in those talks? How does the position on intellectual property which Brazil has adopted with regard to the pharmaceutical industries really contribute to the battle against malaria, tuberculosis and AIDS in Africa? The agreements between the EU and Chile and the EU and Mexico are to be welcomed. They cover variously trade, investment agreements and, importantly, rules on competition, intellectual property and dispute settlement. Do those agreements between the EU and individual countries offer a more realistic way forward than the pursuit of agreements between the EU and the Mercosur group, or between the EU and the Andean or central American groups? On the brink of the fourth EU/LAC summit, which is due to take place in Vienna this month, will there be progress on the EU/Mercosur agreement, and will it be possible to open negotiations on association agreements with the Andean and central American groups? If such progress cannot be made, perhaps the time is now right to pursue what I might describe as the Chilean or Mexican route instead. In that context, I endorse one of the questions of the noble Viscount; that is, where and how is UK policy on trade and investment conducted? Over my working lifetime, this issue has bobbed up with tedious regularity. Valiant attempts have been made by both Conservative and Labour governments to deal with the issues, but I am afraid that there is a bit of good, old-fashioned turf war, not just between Ministers—who, I am sorry to tell the Minister, are birds of passage after all—but far more tellingly between Whitehall officials. A permanent secretary who cedes ground by letting an important part of his department’s portfolio go to another department is widely perceived to have let his department down. So the trade Minister now works primarily in the Foreign Office, but responds not only to the Foreign Secretary but to the Secretary of State at the DTI. Trade policy, however, is primarily conducted in the DTI, with input from the Foreign Office on broad economic issues and political impact. UK Trade & Investment, under its admirable new chief executive, Andrew Cahn, sits between the two departments and, in theory, responds to the trade Minister. I shall not even begin to deal with the position of the ECGD, which responds to the Chief Secretary of the Treasury. All this may sound like an excellent example of joined-up government, but, in my experience, having different groups of civil servants working on the same issues but ultimately responding to different Secretaries of State is rarely a recipe for effective decision-taking, let alone operational efficiency. The more I have thought about this, the more I believe that the noble Viscount is right that trade and investment effort should be under one roof, with consultation being carried out as necessary. I am bound to say that I think that that roof is the FCO roof. This issue is crucial in our relationship with Latin America, because the Latin American economies are moving. Brazil may be going slowly, but analysts say that its economy will overtake in size that of Mexico and Australia. Chile has become a beacon for economic and political stability. Its growth is 6 per cent this year, and opportunities for trade and investment in the public and private sectors are good. Mexico’s trade and investment have grown at a steady rate. Public and private partnerships are offering real investment opportunities for British business. Venezuela should be another prime target. Our exports there shot up by some 25 per cent in 2005, and the opportunities in the oil and gas sector are self-evident. The economic importance of these countries is growing. We need a clear focus on our trade and investment relationship with them. We must of course achieve that through the WTO and our European agreements, but, crucially, we must do it also through bilateral agreements, because we need to build the United Kingdom’s trading links with these countries for the future.