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Latin America

My Lords, like other noble Lords, I am very grateful to the noble Viscount, Lord Montgomery of Alamein, for giving the House the opportunity to discuss Latin America. I hope that the noble Lord, Lord Luke, will accept my apologies if I group south and central America as Latin America at least for this afternoon. It has been an important debate, and I appreciate his kindness and that of others for what they have said about what my work entails. I thank all noble Lords who have taken part, and it is a privilege for me to take part in the debate. It is almost exactly a year since the last debate on Latin America as a whole, although there have been two other specific debates in that time in which I have had the good fortune to take part, all of which demonstrate the dynamism and solid intent of the noble Baroness, Lady Hooper, in making sure that these issues do not vanish. This is the moment to take stock. Several noble Lords, in particular the noble Viscount, Lord Montgomery, have talked about opportunities. He is absolutely right. Great nations who ignore these issues and have ignored them for perhaps more than a generation will turn out to be absolutely misguided; we must not miss the tricks. My noble friend Lord Howarth stressed the issue of opportunity, and he and my noble friend Lord Giddens stressed it particularly in relation to higher education, as did the noble Baroness, Lady Rawlings, just a moment ago. All of those help us to get to the right point of focus. Some noble Lords believe that we must pay more attention to Latin America, and I agree. I make no apology for our focus on Africa in 2005, or for arguing that our involvement in Africa is long term if the millennium development goals are really to be achieved. That does not make Latin America unimportant, uninteresting or less fascinating to any of us. Old ties of friendship and trade, and new understandings of economic and cultural opportunity demand more, not less, attention. It is a dynamic, creative region with a powerful, diverse intellectual and cultural identity. The FCO White Paper Active Diplomacy for a Changing World does not list countries as much as identify the themes that we must grasp in our epoch. Most of those themes are relevant to understanding Latin America. The Government are building on an understanding that embraces the whole of Latin America and the Caribbean as well as its individual nations in all our bilateral visits to the area; in the frequent meetings that I and others have had with presidents, Ministers, ambassadors and high commissioners; in the work that we do through the European Union; and in events such as President Lula’s outstanding state visit. My noble friend Lord Brennan was quite right to remind us that as we do so we must also understand that reliance on high raw material prices over long-term aspirations and economic developments is unwise. That is part of the setting of what I want to argue. As everywhere, Latin America’s future depends on successes in international markets. It is inevitable that Brazil and Mexico, our outreach partners at Gleneagles, are key strategic partners for this country in that continent. It is true for trade and for shaping the future rules of trade. The noble Viscount, Lord Montgomery, was right when he said that we are looking for the right structures and what he described as wholly honest ones. What is fundamentally true for those countries is true for others. All face the challenges of blending security, development and human rights—the pillars of progress identified by Kofi Annan in 2005. Poor governance, instability and poverty form a vicious circle. It is against that template that we must do all our new thinking. These are complex issues. We seek a balance between a continent with less micro-economic rigidity, which constrains growth and investment and in the final analysis hurts the poor, and infrastructural investment directed at the education and health of the poor and excluded—the indigenous people to whom the benefits of natural resources and growing trade so seldom come. The noble Lord, Lord Thomas, called for understanding and care in this area and my noble friend Lord Howarth also spoke of this dual focus. Just a moment ago, the noble Lord, Lord Roper, addressed these underlying trends as well. We live in a world shaken by international terrorism, yet Latin America has made great strides in security. It is free of nuclear, chemical and biological arms, and I believe that there is no compelling evidence that Venezuela intends to change that in terms of nuclear development. This is a continent broadly committed to non-proliferation and with little demand for missiles or warheads. The noble Lord, Lord Thomas of Swynnerton, rightly identified the persistent peace between nations on the continent. Over 20 states have binding confidence and security-building arrangements. Its troops are at the core of peacekeeping missions such as those in Haiti and the Democratic Republic of Congo, where Guatemalans heroically gave their lives for African peace. The noble Baroness, Lady Hooper, emphasised the international role now being assumed by Latin American states, and I could not agree more. It is in Latin America—specifically in Chile and Mexico, with help from Canada—that new understandings have been forged for the UNDP report New Dimensions of Human Security, which grapples with the relationship between national and human security. The special conference on security held in Mexico in October 2003 addressed all of the questions that rightly concern us here this afternoon: bearing down on drugs and arms trafficking; poverty and social deprivation; terrorism and organised crime; guerrilla warfare and subversive organisations; environmental degradation and natural disasters. All of this work is being encouraged by Latin Americans themselves in the new architecture of the inter-American commissions. It is true, as the noble Baroness, Lady Hooper, reminded us, that democracy is spreading more generally, is in many places sound and runs to the right timetables. Much of the work that is still needed in the democratic architecture is stirring below the surface. I also welcome the IPU’s work, as did the noble Lord, Lord Roper. In just the last year, parliamentarians have visited Uruguay and Argentina, Paraguay, Colombia, Peru, Chile, Costa Rica and Nicaragua. It is all in many ways encouraging. So why is there a sense of anxiety about this complex of development, security and human rights? What still fuels apprehension about economic development capable of lifting the continent’s poorest people from abject poverty? First, of course, it is the history of instability. Since 1990, there have been five coups d’etat, social upheavals have removed eight more heads of state, and there have been 19 military crises or declared states of emergency that I can identify. My noble friend Lord Rea also reminded us of parts of that history. The murder rate in the region is highest in the world, with more than 25 murders per 100,000 people per year. Uruguay and Chile happily show no such problems. The victims are typically young and their deaths, whether in gang wars, or as victims of the maras in central America or narcotics racketeers in Colombia, Peru or Mexico, cost the region 14.2 per cent of GDP, according to the Inter-American Development Bank. I have not even tried to factor in the costs of robbery, abduction and child homicide. To be sure, there are still border disputes: for example, the Belize/Guatamala territorial dispute where we support Belize’s territorial integrity. But it is also true that some of the violence that we are looking at in today’s debate is within and not between states conflict; it is transnational and intra-state. On many occasions we fear that some states may turn a blind eye to some of the international criminals involved in narcotics, arms racketeering and people trafficking. But these criminals are indifferent to borders. Most significantly, they tend to populate the space left by poor governance and weak democratic practice. That remains the difficult key to understanding much of Latin America and the Caribbean in practice. Insecurity surely results still from the fact that governments are unable to assert the rule of law in their own territory but lack a monopoly over the use of force in their territory. As ever, among the chief victims in a civil society too weak to play the necessary anchor role in national stability are trades unions, Churches, women’s organisations and, tragically, young children. What a contrast can be seen where governance is strong and economic growth has been shown to follow it. For the most part, it remains nationally strong not only where regional markets have taken root but, most importantly, where there have been real developments in the economies of those countries. I fear that the prospects of a free trade area for the Americas are still limited. Caribbean integration is just starting, as I found out in the region last week. Recent national independence continues to curtail a desire for greater economic integration. I will return to the WTO later. Lack of key reforms and weak fiscal structures and institutions remain significant difficulties. Those are everyday systemic problems and, at times, like the key WTO rounds, are considerable barriers to progress. Thus the volatility of Latin American markets is sometimes striking when compared, for example, with emerging Asian markets. Rapid growth in Latin America has too often given way to sharp reserves. In truth, and despite some periods of remarkable growth to which noble Lords have drawn attention today, it was not until the 1980s that market-oriented policies designed to achieve any measure of macroeconomic stability were realistically attempted. The measures to remove high tariffs, import substitution, credit rationing and massively regulated labour markets were finally tried, although somewhat inconsistently. But where they have been tried the successes have been clearer. The evidence is most abundant in Brazil and Mexico, for example, which may be the reason why their true and huge potential may come to be fully realised. I contrast that with Chile which saw through its reforms under centre-left governments shrinking national debt, lowering tariff walls and liberalising trade, a course now followed in NAFTA by Mexico. As my noble friend Lord Giddens said, Chile’s economy is a remarkable model. It accompanies political liberalisation and sound social policy, which are drawn together. The impetus is gradually taking hold as budget deficits, more flexible exchange rates and better public debt to GDP ratios figure in economic planning. We can all see the benefits. For a decade from 1986 inflation across Latin America averaged more than 180 per cent. The figure for 2005 is 6.3 per cent and it is falling. That brings us to the crucial questions posed by my noble friend Lady Symons and others. Progress on global trade talks, economic liberalisation and regional integration is vital for Latin America’s development. We share with Brazil, Mexico and other countries in the region a common view of the main elements of an ambitious pro-development outcome to the WTO round. A successful round is essential to lift millions out of poverty and to integrate poorer countries into the global economy. We believe that all the main parties, including the EU, the United States and G20 now have to take the bold steps necessary to    drive this through. Commissioner Mandelson continues to urge the region to integrate to a greater extent. When I last heard him speak he sought greater coherence from Mercosur, arguing that asymmetry in economies made it difficult. None the less, as the noble Lord, Lord Roper, said, whatever the shortcomings it is necessary to make the achievements. Regional integration is where it happens: a positive force for stability, economic growth and investment in Latin America. Recent developments including the withdrawal of Venezuela from the community of Andean nations and the creation of the Bolivarian alternative, ALBA, to which my noble friend Lord Rea also made reference, which seeks to be a counter to the free trade area, have shifted the ground and made it all the more difficult. We will continue to follow those developments on regional integration in the area with interest. Negotiations with regional blocs are difficult but there have been some effective gains, some positive results in discussion with individual countries. That is most clearly illustrated by our work with Brazil on the Doha development round. I emphasise development because that is the point of the Doha round. Will there be progress in Vienna? There are highly diverse positions. Bilateral approaches may be more successful at this stage because there continue to be fracture lines within the regional groupings. Would it be helped if educational opportunity spread more widely, as the noble Lord, Lord Giddens, suggests? The answer must unquestionably be yes, because the importance of those developments requires people capable of motoring those developments to a conclusion. The noble Lord, Lord Walker, and the noble Baronesses, Lady Thomas and Lady Hooper, also raised the issue of China’s role, and other noble Lords have mentioned it. China has a major involvement. I shall not go through the list of statistics of the extent of its involvement now, because noble Lords will already know that it is huge. Its trade alone rose by 400 per cent between 1999 and 2004 and most of the other figures show similar rates of increase. Investment has been targeted at sectors related to Chinese interests, especially oil, minerals and some transport and infrastructural projects. All of that is a picture of a profound challenge and we would be foolish to neglect it. All of us would be foolish not to try to put in the effort required, although whether anyone these days can match the entirety of China’s efforts across the world in that respect is a difficult and important question. We can see the architecture in all of that of the UK’s strategic interest. We need to work on governance in the fullest sense. We need to aid those nations attempting to close down narcotics empires and trade in arms and in people. We need to work for human rights. We need to work on economic reform in the context of globalisation and to understand that we must do so in a developmental way. In short, the programmes that lift the poorest people, the most dispossessed indigenous peoples, out of poverty and all of its sickening adjuncts in violence, must be part of our programme. That is why the Government are committed to helping the region where we can. Like the noble Lord, Lord Roper, who appealed to us to make sure that our role addresses poverty, development and security, we are trying to do that. We are providing £6 million over three years under the global opportunities fund covering economic governance, climate change, energy and sustainable development; around £100 million per year in DfID development funding; £3.75 million over three years for global conflict prevention in law and order and security; and £1 million this year for tackling drugs and crime. I share with my noble friend Lord Howarth the importance of the Key West work. We should be determined to interdict drugs before they arrive on the streets of the United Kingdom. I was able to discuss that matter last week in Kingston, Jamaica, and with the Caribbean Forum. A good deal of work is also proceeding on water. There is a high level sustainable dialogue with Brazil, which was signed during the Brazilian state visit, and similar sustainable dialogues are going on with Mexico later this year. We aim to build a strong bilateral contact, building capacity and facilitating exchanges on those questions. My honourable friend Elliot Morley attended the World Water Forum in Mexico in March to drive forward those discussions. The work is focused on central America, the Andes and Brazil. It covers good governance, the impact of trade on poverty, the access of the poor to markets, the benefits of legal economic activity and HIV/AIDS. The sum of £7 million a year goes to six British NGOs to support their work in the region. It is an estimable programme, although I too think that there are problems with the definition of ““middle income”” that may impose a limit that some would regard as restrictive. But the Government concluded that work of this kind requires a specialist department to undertake outreach into the world, rather than the type of work conducted by the FCO. I always like the moments when someone suggests huge growth in my department’s resources, and I thank the noble Viscount for suggesting it. There has been a good argument for separating resources so that they do not become tangled up and our aid and trade and foreign policies do not become so confused in operation as to limit their value. I deeply respect the 50 years of experience of the noble Viscount, Lord Montgomery, and I understand his argument that this arrangement should be reviewed. I know that some heads of mission spend money on development because they have a small element for it in their budgets. I suspect that were that element larger, they would spend a larger amount equally effectively. It is certainly true that the separation of departments exists, and I can happily tell the House that there is a good working relationship between DfID and the FCO and that my right honourable friend Hilary Benn and I meet frequently and talk pretty much daily. Trade promotion is an important area of co-operation. My right honourable friend Ian Pearson bridges the departments of the DTI and the FCO, and I am proud of the FCO’s expertise in the relevant areas. But it is always worth reviewing how we promote trade, and I shall report this discussion to the Foreign Secretary to seek his view. I shall turn briefly to other issues that were raised. On Argentina, I respect the view of the noble Lord, Lord Luke, that growth has been fundamentally good and that there are still anxieties among investors who dislike rude shocks. Voluntary price restrictions are a difficult counter-inflationary weapon to use effectively regardless of whether they are bolstered by a ban on beef exports. They do not appear to be strong. On the issue of the isolated communities that are cut off by recent floods, there has been no request from the Argentineans for any assistance. We hold regular discussions on the south Atlantic fisheries with Argentina. The last discussions took place in Buenos Aires in December 2005 and we are talking to our colleagues about arrangements for the next talks. The noble Baroness, Lady Rawlings, the noble Viscount, Lord Waverley, my noble friend Lord Brennan and other noble Lords raised the Bolivian hydrocarbons issue. It is a significant development. I understand that there is a meeting between the presidents of Brazil, Bolivia, Venezuela and Argentina in Brazil today to discuss the future of Bolivia’s hydrocarbons industry. In advance of that meeting, I will say only that I think that the original contracts were fair. My noble friend Lord Rea raised the issue of the new arrangements that may be made, and I have no idea about them. However, it is difficult to imagine that the outright imposition of nationalisation will boost international investor confidence. I suspect that this is an issue that will need to be looked at. As for our work in Colombia, we remain keen to see all steps taken to end the inter-community disputes. We continue to press the issues and are eager to ensure that Colombia’s human rights record improves. I will ensure that I address any outstanding questions. This has been a valuable debate which has allowed us to discuss developments in the region a year on. Our friends and even our critics in Latin America will know that we are ambitious for Latin American success. We believe that volcanic economic policy changes can devastate the prospects for investment and that with devastation the prospects for the poor get poorer. Everyone should know that today’s headlines are only that—just today’s headlines. It takes real leadership in any country and on any continent to distinguish between a bandwagon and a tumbril. The Government will continue to have a full agenda with Latin America. I will certainly try to take that forward in the coming year and will not lose enthusiasm. If I may say so, I do not believe that the noble Lord, Lord Brennan, would allow me to.