Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 12 - Evidence, December 2, 2010
OTTAWA, Thursday, December 2, 2010
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:35 a.m. to study 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.
[English]
The Chair: Honourable senators, we had two invited panellists for this session. One had been changed from yesterday to today, so the clerk is ascertaining whether there was a misunderstanding of the time or whether our witness has some problem getting here. However, I think we can begin.
This is the Standing Senate Committee on Foreign Affairs and International Trade. We are continuing our special study on the political and economic developments in Brazil, and the implications for Canadian policy and interests in the region and other related matters.
We have, appearing before us, both of our witnesses: Mr. Carlo Dade, Executive Director of FOCAL: Canadian Foundation for the Americas; and Mr. Pablo Heidrich, Senior Researcher — Trade and Development, from the North- South Institute.
As senators know, we are assessing Canadian policy and interests in the region centred on Brazil, but one cannot talk about Brazil if one does not talk about the region. Therefore, I think both organizations, the North-South Institute and the Canadian Foundation for the Americas, are well versed on the issues around Brazil and the surrounding region.
Pablo Heidrich, Senior Researcher — Trade and Development, The North-South Institute: It is a great honour for me to be here today as an individual and as a researcher at the North-South Institute. As you know, it is one of Canada's leading non-profit, non-partisan independent think tanks and we are dedicated to promoting global development.
My remarks will be brief and I will be available for any questions you may have today or later. Please note that the views I will be expressing today are my own. They are also grounded on the empirical policy research that we carry on at the institute. The particularity of our work is that we work systematically with networks of researchers, and sometimes former policy-makers and academics from southern countries. We integrate research done in the North with research done in the South. That is very much the character of the recent work we did on Canada-Latin America relations, particularly on economic matters. I have a few policy suggestions regarding the recent history of Brazil's policy toward the region, as well as its increasing initiatives in the global arena.
I will be going back and forth between the recent past and what is the likely future for Brazil, and what that could mean for Brazilian-Canadian relations.
As you know, Dilma Rousseff is the current president-elect of Brazil. In our understanding, she seems likely to continue the main lines of Brazilian foreign policy, as inherited from the previous presidencies of Lula da Silva and Fernando Cardoso. That means she will maintain what is called in Brazil "a good neighbour policy'' toward Latin American countries, including those who have fairly controversial policies in the eyes of extra-regional and some inter- regional observers, such as Venezuela and Cuba, as well as Bolivia and Ecuador.
That foreign policy of Brazil is grounded on its own economic interests and the economic interests of its main firms, along with quite a bit of pragmatism and a long-standing Brazilian tradition of trying to support Latin American countries facing different kinds of external interventions or pressures. Within that, the main thrust of Brazilian foreign policy under the Rousseff presidency is likely to remain deepening MERCOSUR and simultaneously giving more content to another Brazilian initiative called UNASUR, the Union of South American Nations.
The strategic focus of MERCOSUR and UNASUR combines defensive and offensive, in the sense of ambitious economic and political interests of Brazil, using South America as a platform for its global play, as well as a system of economic assurance when it is confronting increasing competition from extra-regional actors such as China and India. It needs to maintain stronger margins of preference in MERCOSUR and perhaps, in some particular initiatives, within UNASUR. UNASUR brings together all the countries of South America.
In terms of multilateral intentions — and I would later argue that, in my view, that is perhaps the most fertile area for cooperation between Brazil and Canada — Brazil will remain pretty much focused on trying to close the Doha round or a subsequent move to that same end. It will remain a strong player in the G20. That has to do with Brazil's concern on reducing global imbalances, particularly seeking some kind of agreement on currency issues at the global level.
On the other side, I would say that Brazil will continue playing an ever-increasing role in terms of international cooperation in Africa, perhaps also in the Middle East and certainly in the Caribbean and Latin America, with its particular forms of economic development cooperation, which are quite distinct from Canada's.
Finally, I would say that Canada and Brazil are quite a study in contrasts in terms of style and content for foreign policy and that provides quite a puzzle for those interested in improving the bilateral relations.
One way to approach this is the example that Brazil is very vocal in its demands for changes in global governance, particularly on economic issues with respect to the IMF, the World Bank and the UN Security Council. At the same time, Brazil is also strongly encouraging the participation of labour confederations with high-level status within G20 discussions so that it is not limited to national governments and strong international business groupings.
On the other side, I would say that Brazil intentionally keeps a very low profile in areas where Canada does otherwise, such as questions of human rights. Brazil is very uncomfortable with initiatives that pressure, name or shame countries to improve their human rights records. It prefers to do that through back channels and with very discrete measures.
Another example of Brazilian discretion is the very strong cooperation in anti-terrorism that it has provided to the United States and other countries of Europe in regard to problems with al Qaeda, for example.
Brazil is a global player that has a strong regional focus, a growing multilateral agenda and a distinct style in its foreign policy in the way it incorporates its own economic interests into it. To be most effective, the Canadian response must start to understand Brazil's belief in the legitimacy that such regional and global roles have for it.
I would suggest that Canada's foreign policy would be most fruitful if it tried to include closer cooperation with Brazil on global issues. You should understand that Brazil will remain fairly cautious in trying to expand bilateral ties through conventional means such as free trade agreements.
We should also be aware that Brazil is promoting quite different policy alternatives in other regions of the world in terms of economic development.
[Translation]
Carlo Dade, Executive Director, FOCAL: Canadian Foundation for the Americas: Madam Chair and the committee, thank you for your permission to be here. It is always a pleasure to meet with Canada's parliamentarians.
[English]
Unfortunately, we are not often here with the Senate. We were just with the house discussing the Canada-Panama Free Trade Agreement and quite a bit on Colombia. It is indeed a pleasure to be here with you talking about Latin America and Brazil.
Briefly, FOCAL is Canada's only think tank dedicated to Latin America and the Caribbean. We were created by an act of cabinet when Canada joined the Organization of American States about 20 years ago. This is our twentieth anniversary; and to some degree, it is Canada's twentieth anniversary officially as a full-fledged member of the hemisphere.
As a policy think tank, we work for the competitiveness of Canada in the hemisphere — competitiveness of our foreign policy, development policy and our private sector engagement. We use evidence-based research, our deep network of working with other policy think tanks and our colleagues and competitors to advance Canadian interests in the region.
In a slightly different take from what the North-South Institute does, we tend to be a bit more focused on Canada, but do the same types of research. We share resources, research and we work closely together.
If you look back on the recent history of Canada-Brazil relations, it seems that every three years or so we discover Brazil again. It is a big country to the south. Something happens, Brazil has done something and it makes another rise. Then we become aware of this giant to the south — a country of over 200 million people that has a rising economy. It is knocking several countries out of the top 10 in terms of global economies. Brazil's economy could make it a G8 member. Occasionally, every three years or so, Brazil hears this and they continue to pay more attention to other priorities they have, while only glancing over Canada.
Let me note that in the spasms of interest, we do occasionally do things. There is a framework for cooperation on technology and we have good academic exchanges. Therefore, we have done things in these spasms of interest in the past, yet we have never done anything that moves the agenda forward in a significant way. We have done nothing that really grabs the attention or seizes the imagination regarding the huge potential between two countries that are the next two powers in the hemisphere.
This time is a bit different, and the change has occurred on two sides. On our side in Canada, we have become serious about the trade agenda with Colombia, Peru and Panama. We are making moves in this hemisphere that no one else really is. The EU is trying and the Americans are stalled; we stand out about this movement on the trade agenda.
On the Brazilian side, there has also been a bit of a change. Brazil is concerned about the United States, and I will talk more about that. On the economic front, especially, Brazil sees what is happening in the U.S. with Colombia, Korea and Panama and they do not see much prospect for movement on the trade agenda with the United States.
They also have not been too happy recently with how they have been doing vis-à-vis China. I was just talking with the head of the Brazil-Canada Chamber of Commerce, a gentleman I urge you to bring in before the committee to get a better understanding of the business ties. His view was that Brazilians are unhappy with China. China wants what it wants, when it wants it, how it wants it and at a deep discount.
Doing business with China is incredibly difficult and the Brazilians, while convinced of the near-term prospects such as putting food on the table today and tomorrow, do not see much benefit of trade with China. The trade in basic commodities is important, but there is not much prospect with the higher-value-end products, where they would like to see their economy grow.
Europe is moving along, but the recent crisis there does not give anyone much confidence.
Canada suddenly begins to look fairly attractive. Though we are not a large economy or large market, we are a rich and sane market and a sane country with which to deal. Given the changes recently in the global agenda, I think Canada has suddenly piqued Brazil's interest. Now is the time to consider something with Brazil.
Looking at Brazil and recent changes with Brazil, there are a couple things we should take note of. Brazil is a regional power in the hemisphere. To some degree, it really is the second power in the hemisphere after the United States. It has certainly displaced the United States as the leading power in South America.
Look at the thoughtfulness and consideration of Brazilian policy and its development, the macro-economical changes that started under Cardoso close to 16 years ago. These include macro-economic reforms and structural adjustments. Look at the discipline in the country that is now running budget surpluses. Brazil has not been impacted by the global economic downturn to the same degree as the United States. In fact, Brazil has come out of this fairly well.
That is a huge turn of events, if you remember recent history in South America within this hemisphere regarding the United States having to bail out countries of the hemisphere. The shoe is now on the other foot, and the Brazilians more than anyone else in the hemisphere will not let you forget that.
On the security front, Brazil has one of the most thoughtful white papers on security in the hemisphere. It is a tool not just for improving security in Brazil to meet the new types of challenges it faces — moving from a blue navy to a brown navy, dealing with narco-violence and repositioning resources to protect natural territory and resources — but it is also a tool for economic development in Brazil and for the region around Brazil.
The Brazilians are using massive investments in airplanes, new ship platforms and missiles as a tool for regional economic growth. They are farming out bits and pieces of what is being built in contracts to their neighbours to bring them into a process of regional security. It is a very thoughtful move, and an indication of the strength and sophistication of Brazilian diplomacy.
Brazil is also one of four leading candidates for a permanent seat on the UN Security Council. I think it has had more seats as a non-permanent member on the UN Security Council than any other non-permanent member. They are quite an international prospect.
They also have strong institutions to act internationally. They have a nascent development agency, with which we have done some work in Canada and that is an area for potential future cooperation. However, the foreign service has a global reputation as being one of the strongest. In Canada, we consistently get very strong ambassadors from Brazil, something that is not uniform throughout the diplomatic corps up here. The quality of Brazil's ambassadors really stands out.
On our hand, we have done well, too, sending down some of our best and brightest to Brazil. Guillermo Rishchynski, probably our leading ambassador served in Brazil. Jamal Khokhar, our current ambassador, is a great asset and another reason for hope about the future and thinking of this as a moment of opportunity. Having a good ambassador in Brazil gives us many options on the ground.
Some critics think Brazil is a little overhyped. This is important for thinking about Canada and Brazil. If you look at the reasons for Brazil's ascendance recently and why people are talking about Brazil, economic performance stands out. It is a country that is rising into perhaps the G8. Have we seen this before? Yes, we have seen it with Mexico, our neighbours to the south.
Brazil, a country from the developing world, is hosting the Olympics. Have we seen this before? Yes, again, with Mexico. Brazil will host the World Cup. That is a stunning achievement after South Africa. Have we seen this before in this hemisphere? I do not need to tell you where we have seen it.
In thinking about Brazil and some of this hype surrounding Brazil, keep in mind that a lot of what we have seen with Brazil, we have also seen with Mexico. This speaks to the future potential of the relationship: Have we taken advantage of what is there with Mexico? Given geographic proximity, given the ties and framework with NAFTA, have we taken advantage of all that is in that relationship? I do not think anyone in Parliament would say we have.
Therefore, in terms of thinking about Brazil and the issue of hype, put into perspective the potential for future growth and engagement vis-à-vis what we have seen with what we have been able to do and not able to do with Mexico.
However, the major difference with Brazil and Mexico is distance from the United States, both figurative and literal. This is giving Brazil a different set of perspectives and room for manoeuvring, internationally. Brazil today does not view partnership with Washington as essential in terms of its international agenda. It is just the opposite; they often consider it an impediment to things they would like to do. They are not shy about voicing their differences with Washington.
The difference between Brazil and other countries in the hemisphere, such as Venezuela, in terms of their response to the United States is that the Brazilian response is stunning in its sophistication, nuance, complexity and strength. This is something we have never seen before in the hemisphere. On issues from Iran to human rights, the Brazilians have a thoughtful response. We may not consider them helpful and we may consider intervention in Iran potentially dangerous, but there are two things about the Brazilian response: First, they really do not care what we or the Americans think; and, second, they can articulate a very sophisticated, nuanced and strong response as to why they do not care and why their view is superior. It also has a great deal of weight in the developing world, a lot more than the United States does, which is an important point to consider.
Let me close on two points in terms of the rise of Brazil. I was in Washington this past summer at the Sol Linowitz Forum. It is our sister organization in Washington, D.C., an inter-American dialogue every two years that puts on a forum with former presidents, prime ministers, foreign ministers, CEOs. Joe Clark was down for Canada; he is a member of the dialogue board. Barbara McDougall attended in the past. They did a session this year on Brazil.
The Brazilians set up the deputy for the Americas and the ambassador, and the Americans had Arturo Valenzuela, who was coming in as undersecretary, Tom Shannon, who was undersecretary, going down as ambassador, and a couple of folks from the Senate. The issue immediately came up about Iran and a more aggressive Brazilian foreign policy, and point by point, the Brazilians and the Americans went at it, something I have never seen before. They went head to head, point to point, and the Brazilians were not only holding their own but also actually winning the arguments, not backing down and not worried at all.
The other funny thing about this is I was sitting next to the chargé from the Mexican embassy, and the two of us were sitting there watching the Brazilians and the Americans go at it. It was like the final Wimbledon, Nadal and Federer playing. The two of us were sitting there like a couple first round wash-outs, 0-6, 0-6, 0-6, watching the final. There was a change of the dynamic in the room that day, and increasingly in the hemisphere we are seeing a lot more of this, with Brazil really taking off. Is there hype? Yes, but there is also substance behind it.
In terms of Canada and Brazil, there are things that we can do. Obviously, there is the trade agenda. If we can remove agriculture from the table, there are significant prospects for moving ahead with trade in other areas, such as minerals, cars and auto parts. There is huge potential for trade with Brazil, and, if we can get agriculture off the table, we can look at that.
There is the possibility of looking at Uruguay to get into MERCOSUR and to get into the Brazilian market. If the MERCOSUR countries are signing individual agreements, this may be a strategy and it may give us some leverage vis- à-vis the Brazilians.
Development cooperation is another area to consider. A few years ago, we had the Brazilians up in Canada for a week. CIDA asked us to facilitate a visit by them and the Chilean Cooperation Agency. They spent a week, Monday 9 a.m. to Friday 4:30, at CIDA, at PMO, at DFAIT, learning everything we had about how to do development assistance. The offer was on the table. "If there is anything in which you have an interest, let us know and we will work with you.'' I think we can aggressively pursue this with the Brazilians. They have their own development agency, and it is growing, but there is a lot we can do with them on this front. There will be competition in other areas, but this is an area where we can have positive engagement, and it may be worth pursuing.
Finally, in terms of Canadian priorities in the region, Brazil is important. It is a huge market. It is a power. Yet, in terms of the priority of Canadian interests, I would rank it second. The largest issue in the hemisphere, the one with which we have done pretty much nothing and are being marginalized and left behind is the trans-Pacific trade agenda. We have two very strong movements within the hemisphere to link countries of the Pacific Rim — Chile, Peru, Panama, Colombia, Mexico, and the United States, with New Zealand, Australia, China, Japan, and Singapore. Canada has been, for all intents and purposes, completely cut out of these negotiations. I am referring to the American- led Trans-Pacific Partnership and the Latin American-led Arco del Pacifico. Both initiatives are currently stalled, and the American one for obvious reasons; if you have seen Congress recently, the last thing you want to talk about is trade. It will be about three and half years until the Americans get their act together. It is our window of opportunity given the past American free trade agreements, lame duck administrations, mid-terms and post mid-terms. The Latin countries are also getting their act together. Their initiative was sabotaged by Nicaragua and Ecuador, and those countries in Latin America that are serious about trade are looking to move ahead with this initiative. It is something where Canada has not done any work, and we are being left out. We not part of either set of negotiations. We were dis- invited from the last Arco del Pacifico meeting.
In terms of priority, yes, Brazil, and I think we have the resources to do Brazil and Trans-Pacific Partnership, but not much more. I would toss that on the table as a marker in terms of Latin American relations and Canadian engagement with the wider hemisphere.
The Chair: We have covered a lot of ground, and I have many senators wishing to ask questions, starting with Senator Fortin-Duplessis.
[Translation]
Senator Fortin-Duplessis: First of all, Mr. Heidrich and Mr. Dade, I want to congratulate you on your reports, which are really very interesting and very well researched. I have two questions for you.
In 2010, the World Bank Group has ranked Brazil the 129th country in the world for ease of doing business, behind such countries as Fiji, Azerbaijan, Mongolia, Kazakhstan and Botswana. Why do you think it is so difficult to do business in Brazil?
[English]
Mr. Heidrich: According to the World Bank methodology, yes, Brazil is ranked as a difficult place to do business. At the same time, it is one of the main destinations for foreign direct investment in the world. Foreign direct investment is not only coming to a particular industry but is all over the board. It receives plenty of investment in services and natural resources, also in manufacturing, and not because it has any preferential tax treatments or labour advantages, as could be the case in China.
Having said that, yes, Brazil is a very difficult place, and the reason has to do with, for example, being a federal country, and there are multiple levels of regulation that are often overlapped. Another issue is most of political parties in Brazil have quite, I would say, a system of distribution of favours, material and otherwise. That makes regulation making and regulation enforcement quite difficult.
Finally, I would say that Brazil has a colonial tradition from Portugal in which administration and not necessarily growth was the main goal for policy.
[Translation]
Mr. Dade: I agree with most of what Mr. Heidrich has just said.
[English]
I would stress that the federal structure does make things different, especially in terms of financial and tax matters. The states in Brazil have quite a bit of power, and differences in regulations are an issue from the state level. We see some of that too. It has not been beneficial in terms of competition, but to some degree, competition between the states can be helpful, and that would not be captured in a doing business index, unfortunately.
I would suggest that you bring in the Brazil-Canada Chamber of Commerce. They are bullish on investment in Brazil and doing business in Brazil. They speak for a number of Canadian companies, large ones such as SNC-Lavalin and others that are looking at infrastructure investments. The potential future infrastructure investments in Brazil are huge. Largely, we have seeing it obviously in the Panama Canal, but if you take that sort of investment and go state by state in the Brazilian states that will be dealing with the Olympics and the World Cup, you are looking at massive investments in infrastructure. Canadian companies have interest, and they are already positioning themselves to go in, so the larger Canadian companies do not seem too worried about this. We also have small and medium enterprises that are doing business in Brazil. There is a great story about an Air Canada stewardess who is doing a fashion business with Brazil.
Yes, the index does capture problems, but those problems seem to be surmounted by the Canadians that are doing business there. I suggest that you have the Chamber of Commerce come to this chamber if you want an answer to this question.
[Translation]
Senator Fortin-Duplessis: My second question is different. We know that Brazil is making an effort to establish its own development assistance program and thus to change its status from a recipient to a donor.
However, Canadian development assistance is ongoing in Brazil. CIDA's disbursements totalled $14.5 million for 2008 and 2009. In a context in which Brazil ranks tenth among the world's economic powers and its economy is growing at a rate of nearly 10 per cent for the second quarter, do you believe that CIDA's disbursements to Brazil are still justifiable?
Mr. Dade: Yes, but not in the way Canada has always provided aid to Brazil. Canada has an opportunity to change its relationship with Brazil by providing it with assistance as it did in Haiti. There is a Brazilian NGO called Viva Rio, which is involved in the development of crime prevention and reduction initiatives. It is a Brazilian project but is funded by CIDA.
There is a way to use our aid in Brazil, either by improving the Brazilian aid system or by co-funding development projects to assist Brazil in developing the qualifications of officials in the ABC department, the equivalent of CIDA in Brazil. That is something very promising.
More than that, I believe we need to introduce the development program with Mexico in order to address the problems of crime and violence. So there are a lot of new ways to use aid in Brazil.
[English]
Senator Segal: Mr. Heidrich, I am a big fan of the North-South Institute. I think they do outstanding work and have been part of more solutions on international development issues than problems, and that is to their credit.
My question relates to the relationship between Brazil and what I would call potentially problematic countries like Venezuela and how that dynamic is likely to play out with respect to strategic balance in that part of the hemisphere.
I will ask Mr. Dade about whether that Wimbledon match is something in our interest or whether in fact we do not have profound interest in an American-centric approach to the hemisphere because America actually shares a large amount of our values on issues like democracy, freedom, opportunity, gender rights and all the rest.
I want to first get the sense of Mr. Heidrich on the dynamic on what I would call problematic relationships and his best advice on how Canada should engage with Brazil on that front. If we look at what Brazil attempted to do, I am sure with the best of intentions, on the Iran file, where I think they probably got some encouragement from the United States, as did the Turks, relative to some engagement before the new frame of reference about new negotiations came into play, it is not at all clear that their present stance is as constructive as one might hope. They share with us a common interest in preventing nuclear proliferation. I would be interested in your advice on that.
Mr. Heidrich: In terms of the overall relationship of Brazil with Venezuela, there are several levels to it, but the sum is that Brazil tries to play a dual role in Venezuela and also in the context of South America and Latin America where Mr. Chávez also tries to play a role. Brazil tries to moderate some of the external policies of the Chávez administration, particularly its very aggressive tone towards Colombia. Brazil has been forceful in trying to moderate that even when Colombia made an agreement with the United States on several military bases that upset Brazil.
Senator Segal: Why would Brazil have been upset? Do they see Colombia as an enemy? Do they see the United States and its security presence in the hemisphere as a threat to Brazil? Why would they be upset about that?
Mr. Heidrich: They were concerned because it could lead to further tensions between Colombia and Venezuela and Colombia and Ecuador. The paper that was cited, this white paper on defence from the Brazilian military, implies that they have a strong articulation of their defence policy as defending natural resources and particularly those in the Amazon. Some of the bases were in the Amazon area of Colombia and presented some competition.
Returning to Brazil-Venezuela, on one side Brazil tries to moderate Venezuela as Chávez uses his most aggressive verbal fireworks, but on the other side, it supports the Chávez administration, particularly in terms of its social policies and modes of social policy cooperation with other Latin American countries. Brazil does that because of the identity of its own political party now in office, the Partido dos Trabalhadores, or the workers' party, and of Mr. Lula and Ms. Rousseff. In addition, it allows Brazil to put a certain amount of pressure on other Latin American countries to also follow economic policies with stronger social content.
In other words, by not condemning Mr. Chávez, Brazil is positioning itself at the centre and using Mr. Chávez as a left-wing falcon on other countries such as Colombia, Chile or Mexico that have less social content in their economic policy.
Senator Segal: In your judgment, would the Brazilian foreign ministry and defence ministry be completely untroubled by Venezuela's support for insurgencies and terrorist groups in other parts of South America? They would be cool about that? They would say it was insignificant?
Mr. Heidrich: No, definitely not. That is a very serious problem, and actually, I think they have moderated their cooperation with Chávez since more evidence has been found about that.
Another thing that must be mentioned is that some of the largest foreign contracts of Petrobras, which is a state- owned but privately run oil company of Brazil, are in the oil reserves of Venezuela, and the same applies to some of the largest physical infrastructure projects of Odelbrecht, which is one of the leading construction companies of Brazil. Mr. Chávez has given those contracts, and Odelbrecht is one of largest contributors to the workers' party.
There are many connections between businesses and governments, and this is something that even applies to some of the operations of Vale in Canada or Gerdau. Many of the foreign contracts of Brazilian companies are also financed by the Brazil National Development Bank thus, the strong state-business connections.
Mr. Dade: On the question of Venezuela, it is always hard to leave Venezuela alone when dealing with Latin America. However, there have been two approaches to dealing with Venezuela: the American and the Brazilian. The American approach has been to try not to engage with Chávez, not to give him ammunition, not to play into the theatrics. The Americans play their role as the opposite in the theatre that Chávez is conducting for politics in the hemisphere.
The Brazilian approach has been engagement with Venezuela where things that are important to Chávez, initiatives that are important, tend to disappear. It is almost as if everything is sent off to committee for further study and you never see or hear from it again.
The idea for a Latin American, UNASUR-type television station was a strong Venezuelan idea that had people worried about the influence of the media. The Brazilians immediately adopted this and said that is a great idea; let us study it. We have heard nothing about it.
Time and time again the Brazilians have been able to engage Chávez, deflect some of his more manic ideas, and it has worked out quite well for the hemisphere. The Brazilian conduct of diplomacy, vis-à-vis Chávez, has been brilliant. The question is, whether it continues without the charisma of Lula to give it face and cover. Dilma Rousseff is not as charismatic and will not carry on the international stage the same way Cardoso did, and certainly not the same way Lula did.
The Brazilian foreign ministry, Itamaraty, is fully capable of continuing this policy of engagement. The question is can Brazil do it without Lula in the lead as president.
In terms of military bases, in recent Latin American history, we are dealing with a series of governments run by people who came up under military dictatorships backed by the U.S., and they were of U. S. influence the region, that many people in the hemisphere do not consider constructive or helpful. Those memories linger. We see this in the response to Honduras, the vehement reaction to Honduras by all countries in the Hemisphere: Chile, Insulza, the head of the OAS, and Brazil. To some degree, this memory still lingers, and it is a raw and open wound in some cases.
The Americans handled it badly. They did not think it would be much of an issue; they did not put in the proper diplomacy in advance to assuage concerns and reduce potential tensions. It was a train wreck that one could see coming from far away. It is no surprise Brazil acted the way they did.
Senator Mahovlich: Canada is very active in banking. We are in the Caribbean and in the United States. Are our banks active in Brazil?
Mr. Dade: To some degree, but not the same way as elsewhere. Brazil is a huge market and has special requirements. The federal nature makes it more complex and difficult than going in other areas.
As far as I know, Canadian banks are looking at Brazil. However, in terms of actual engagement I could not comment. I know it is not the same as say Colombia or in the Caribbean, where we are the number one and two in terms of banking. It is nowhere near that. It is not completely insignificant, but where it lies between the two, I do not know.
Senator Mahovlich: Does the state govern the banking system in Brazil? Is the federal government involved?
Mr. Dade: In terms of regulation, yes. The development bank is still up and running, I believe.
Mr. Heidrich: The banking system in Brazil is an enormous business and extremely profitable. It has recently gone through a session of consolidation, in which five or six banks control most of the assets. Actually, one of them is the state and two of them are Brazilian, privately owned, two are American, and the other one is Spanish.
Scotiabank is the Canadian bank with the most experience in Latin America. It has started large operations in Peru and Chile, and has recently started more operations in Colombia. I know it has been looking for a bank to buy. I understand RBC is also considering that.
It is extremely hard to enter there with a greenfield, to start a new operation from scratch, so one would have to buy assets. That is because when you are a new institution in a new market you have a lot of information problems. You do not know your clients, so it is hard to decide who to lend to and how much. Scotiabank or RBC will probably have to buy a bank, but because the banks that are actually profitable to buy have become bigger, and the real has appreciated enormously, it would mean a strong commitment. It would be hard to enter with anything less than $5 billion to $7 billion.
Mr. Dade: We are also not in Argentina or Uruguay, the markets that are close. The leakage of information across the border that would make things easier is also absent for us.
Senator Wallin: We heard a bit of testimony yesterday from a gentlemen who said that in some sense, maybe from Canada's perspective, we should be more focused on the Andean nations and that the Chile has more in it for us.
Some of the things you both have said today have lent some weight to that, which is to do shared development work with Brazil. I am not really sure what that offers us. It is not clear that they want to do any bilateral trading deals, obviously, under MERCOSUR.
As Senator Segal pointed out, the relationship with the U.S. is a little troubled, and that is our primary trading partner any way you look at it. They have some emphasis on security and military matters, but maybe not with the same perspective as us. What, if anything, should bring us together?
Mr. Dade: I would say on the trade front there has been a marked change recently. It is a rare window of opportunity, the change in the Brazilian perspective that perhaps it is worth the time and effort to invest in Canada. We need more investigation and we need to have this thesis tested.
What I am hearing from contacts in Washington and the region is that, indeed, the Brazilians are starting to see us as worth the effort. It is a small market, but you could sell to two hundred Chinese or you could sell to one Canadian, and the type of things they would like to sell, they would like to sell to us. There may be a change on the Brazilian front to investigate and pursue.
In terms of the shared development agenda, there is quite a bit in this for us. We have the chance to get in on the floor with an emerging development power. Eventually Brazil will be doing more development. The ABC, the Brazilian Cooperation Agency, has been active in Africa, and they are ramping up. This is a chance to have Canadian ideas, our way of doing business, what we have learned, integrated into a new development agency.
If you are looking towards the future and future cooperation, it would be good to have an agency that shares our systems and our understanding, a partner for the future.
Senator Wallin: I am trying to figure out why we care whether someone thinks CIDA does a good job and wants to emulate that and that we should send a cheque.
Mr. Dade: It is an investment in future cooperation and being able to work with someone in the future. Having someone who has our systems and values will make cooperation in the future easier.
Brazil is a presence and will become a larger presence. We will bump up against them on the development front in places like Haiti. It would be make more sense to have someone with whom we can work. The cost of working together will be much reduced.
Also, it is an investment in reducing our future aid burden in the hemisphere. If we can bring Brazil and Chile along as aid partners, they will start doing things like covering more in Haiti. They are running the military mission in Haiti. We have two or three guys on the ground in terms of the Canadian Forces. We want them to do more of this. We want more cases in the hemisphere where they are taking a larger cut of the responsibility and footing a larger portion of the bill. It is an investment in the future.
Mr. Heidrich: I tend to agree. Basically it depends on the level of return that you would expect or you would want for the policy.
Working with Brazil is literally more expensive than working with the Andean nations, and perhaps the risks are higher. At the same time, I agree with Mr. Dade. To work with Brazil now is expensive, but in the future it will be more so. That should be included in the calculation.
In terms of the trade front, yes, Brazil will be very cautious. At the same time, it depends on the quality of the deal. Trying to make a bilateral trade agreement with Brazil, with MERCOSUR, without the agricultural sector is just not talking the same language. They will stand up and leave the room.
At the same time, one must see that MERCOSUR, in spite of its problems, has quite a trade agenda of its own. They have been negotiating with India and have already achieved certain levels of agreement. MERCOSUR has been negotiating with China and is about to close a free trade agreement with the EU after 15 rounds of negotiations that started nine years ago. As well, they have several sectoral agreements with Mexico.
The possibilities for Canada in a free trade agreement with Brazil, as I said, would be expensive; but it could be highly profitable. We are talking about an economy of $1.5 billion. They consume an enormous amount of auto parts for example. They are a net wheat importer. They import wheat from Argentina, but Argentina also wants to sell it elsewhere. There is a market for that as well.
With respect to questions on development cooperation, it is important to note that development cooperation for Brazil means something different than what it means for Canada. It provides, of course, international political legitimacy and a kind of coming of age. For example, what Brazil does in Africa, which Lula will promote strongly after his presidency, is a model of development anchored on improving agricultural productivity, on land reform and connecting land reform with transfers of adequate technology. He is also transferring expertise in social policy, such as how to design cash and conditional transfers to the poor. That is very different from what Canada or other OECD countries do. As you see, the aid marketplace in the world has become more competitive. At the same time, Canada and other developed nations have more constraints in their budgets in order to provide aid.
I come back to one of my first points: Although it is expensive and we could use the money otherwise, we also have to consider how much it would cost us to reengage them again.
Senator Wallin: I read yesterday somewhere that someone suggested to Bono that maybe he should have a fundraiser in Ethiopia for Ireland. Maybe in that aid marketplace, the world is changing around.
As a quick follow-up to what you said about the aid development side, there is a legitimate hard line on trade issues when it comes to our stance on agriculture. Is there some quid pro quo in there? Is there some way to trade these things off?
Mr. Dade: Do you mean the trade agenda with agriculture?
Senator Wallin: With the trade agenda. If we are to do business on one side and partner with them on the development side, will that make them more receptive to the issue or, given the agriculture issue in Canada, do we make it a non-starter for them, period, regardless of what other business we do?
Mr. Dade: I do not think the Brazilians would take a quid pro quo for development. Obviously, assistance for aid would be a welcomed discussion. They sent the Deputy Director of ABC up here for a week, so there is some interest. I do not think they are willing to trade.
However, if we are to have hope, agriculture needs to be dealt with. I do not know that the Brazilians will simply get up and walk out. You may be right; they might walk out. A few years ago I would have been convinced of that but given the change internationally, the temptation for the Canadian market, the links with the mineral sector, the desire to sell manufactured goods, and the fact that they buy wheat from Canada because it is more competitive than wheat from Argentina; I think it is worth asking.
Senator Di Nino: Mr. Dade, I was struck by your comparison between Brazil and Mexico. I believe you ended that particular comment with a caution to us. As well, you indicated that we probably did not do everything right in our relationship with Mexico. Can you expand on that?
Mr. Dade: There are several ways to phrase this situation. It is like people reaching out to touch an elephant — depending on which part you touch, you get a different reaction. I would say that the Mexican relationship has a lot of potential in terms of market and the NAFTA framework. We were never fully able to get past the United States. Obviously, our trade with Mexico is growing but, given the conditions, has it grown enough? We have cooperation with Mexico, but have we pursued Mexico to get more involved in Haiti? Have we encouraged Mexico to become more involved in the Americas? There is more potential in the Mexican relationship than we have ever looked to plumb or take advantage of. However, if you were to compare Brazil and Mexico, there are similarities, such as size and a huge and growing middle classes. The middle class in Brazil is now larger than the class that is ranked fourth. We see something similar in Mexico. We have never taken advantage of this in terms of sales and Canadian businesses going there.
There is a great book about Canadian business in Latin America called Why Mexicans Don't Drink Molson: Rescuing Canadian Business From the Suds of Global Obscurity, by Andrea Mandel-Campbell. To some degree, that has been the story. Canada has not been able to see past the United States to realize the opportunities in Mexico. It is just a caution. The government can sign the free trade agreement and accords, but the private sector also must be willing to move. We have to be willing to move on issues as well, such as cooperation on development.
Senator Di Nino: If we have not been able to do it in Mexico, can we do it in Brazil? Where did we go wrong? Was it that government resources were not sufficiently or properly placed? Was it the fact that corporate Canada is lazy and did not want to go that far?
Mr. Dade: I will be in trouble with someone when I answer that. I do not want to answer this question.
Senator Di Nino: This is an issue that we have been dealing with for some time now.
Mr. Dade: It is not that things went wrong with Mexico; it is just that they did not go as right as they could have gone. Look at what is still on the table. We have done well with Mexico in terms of increasing trade and linkages and working with Mexicans on cooperation on some issues. For each thing that is there, you see two things that are not there.
I do not know whether perhaps we were not prepared to go beyond the United States. Obviously, we have the Canada-Mexico partnership. Foreign Affairs Canada and SRE are working away on issues at a smaller level. The state- provincial relationships between Canada and Mexico are something that we know very little about but, to some degree, is the real driver of the relationship.
Do not get me wrong; the relationship with Mexico is deep. It is just that there is so much more that we could be doing. On the Trans-Pacific agenda, working with Mexico would be a natural partner to leverage our ties with the countries in the southern hemisphere; but we are not picking up on these things.
The caution with Brazil is that we tend to have big eyes when we see Brazil. We sign a free trade agreement with Brazil with its 250 million people and the next thing we know, Canadian banks will be opening. We will be trading like there is no tomorrow. As a simple precaution, although there is huge potential, let us keep in mind our past experience and recalibrate our perspective and expectations for what will come out of this. It is important because trade will grow, but let us recalibrate in light of what we have seen in Mexico.
Mr. Heidrich: If I may add, many expectations of bilateral trade agreements require two basic considerations: First, no country is competitive across the board or in every sector; and that certainly holds true for Canada. Canada is very good at producing certain goods and services but not across the board. It might be that some of Canada's best exports are not desired by Brazil or by Mexico. Second, we should not be disappointed that the levels of preference we obtain, for example over NAFTA, did not pan out in the way that we expected.
An FTA also provides a not-so-generous mirror on what we are good at. What can we do well? I mentioned before that if a Canadian bank wanted to buy a Brazilian bank, it would have to put together $7 billion.
How many Canadian banks do you think can put together $7 billion for an operation in Brazil? When was the last time a Canadian bank used $7 billion to buy something? It is quite significant. Canada is what it is and we should understand that.
Having said that, there are many possibilities. Look at what Brazil has been doing with MERCOSUR. MERCOSUR is a customs union and different from a free trade agreement. A customs union means that the members of the customs union cannot negotiate separately. For example, that is how Uruguay was stopped from negotiating a free trade agreement that they really wanted with the United States, and the United States was ready to offer.
However, there is something else that can be done. You can do sectoral agreements on particular industrial sectors. It can be done on services, on auto parts or some sections of mineral services. Those are windows of opportunity, but those windows of opportunity mean that we need to have a deeper level of introspection that is usually done when we negotiate a free trade agreement across the board.
Senator Jaffer: I enjoyed your presentations. I agree with Mr. Dade about Jamal Khokhar's presence in Brazil; he certainly brings great strength for our diplomatic core in Brazil.
I would like you to expand on Brazil after President Lula. One of the messages I heard from both of you is the strength of the diplomats of Brazil. Obviously, you need a strong person on top. The new president may be that, but she may not have enough international strength.
Mr. Heidrich: Let us start with Ms. Rousseff. She is a person who has never before held an elected office. Not only that, Brazil is in Latin America and she is a woman. It is really hard.
I have to say that in her career, the two most important posts she had before, besides being a chief of cabinet for Mr. Lula, was that she was a minister of energy and mining and then she was minister for infrastructure. In both of these posts, she made policy during the Lula administration. With energy and mining, she regulated how the new gigantic oil discoveries made in Brazil would be administered. They will not be administered in the usual way; they will be administered in a way that the government and the state will have much stricter control than before.
In infrastructure, she dedicated enormous amounts of money to expand physical infrastructure throughout the country, in many ways colliding with established interests but also with, for example, environmental groups. You have to see that for the first time in Brazil, an environmental party became the largest party in the presidential elections, getting close to 15 per cent of the vote as a result of some of the policies that Ms. Rousseff had been pushing forward.
I would say that her government has been called in a very unflattering way the "government of the nerds'' because all the key positions will be held by intellectuals or professional members of the bureaucracy and not by politicians. The head of the central bank will be someone from the bureaucracy, Alexandre Tombini; the minister of planning will be another woman, Miriam Belchior, also a former bureaucrat; Guido Mantega is a former bureaucrat who will be the new finance minister. The chief adviser for foreign affairs will remain the same as with President Lula.
The government of Brazil with President Rousseff will remain a government very engaged with development with very strong social content and a model of development in which government and large businesses are very close partners. If you think of Brazil in the context of India, China and Russia, Brazil is actually much closer to China than to India because the relations between government and the large companies of the private sector are very close. At the same time, it is far from China because no one advocates seriously for socialism inside the government of Ms. Rousseff. Many appearances are quite deceiving. Brazil looks as the most western of the BRIC, but is it so?
The Chair: Mr. Heidrich you made the comparison with China and India. India is a democracy, but India has a very strong bureaucracy. Politicians come and go and are seen, but unless you make a change in the bureaucracy, as they did in the early 1990s, nothing changes. Are you saying there is a bureaucratic essence in Brazil that keeps it going despite a Lula, Cardoso and a Rousseff?
Mr. Heidrich: No, I would say that two administrations of Lula da Silva eventually provided an evolution from a government that was more party-directed to a government that eventually became more bureaucracy-led. Bureaucrats come in many colours and sizes, and the ones who are very much put at the pinnacle with the Rousseff administration are people that are ideologically close to the workers' party but are still bureaucrats or professional members of the government.
Mr. Dade: On what Ms. Rousseff will do, there is a mini-boom in the industry in Washington of people trying to figure this one out. Anyone who has strong insights would be making a lot of money right now and would be on television every five minutes.
We know that Brazil has benefited from 16 years of good leadership. It has not just been President Lula, but President Cardoso before him. Recently, Cardoso made noises in Brazil about people not forgetting his role in laying the foundations and groundwork for what President Lula has been able to accomplish. In the same way, what Lula has done will enable Dilma Rousseff to be able to continue the policies and to do more. It is important to keep that in mind. This is not just a Lula shell. Brazil has had a long period of not good governance, but exceedingly good governance. There is no reason to think that will be missing. The charisma may be down but the competence, as Mr. Heidrich mentioned, will be there.
An interesting early test for the new president will be the debate about a new minimum wage law. It will be interesting to see how she does vis-à-vis the elements in the workers' party, the PT. The PT wants a large increase in the minimum wage and benefits, and it will be interesting to see whether she is able to hold the line.
Brazilian productivity is not that great. They have a great intellectual class and professional class, but at the lower ends, education is a major weakness for Brazil, even in comparison to other countries in the hemisphere. Productivity is not there to justify a huge wage increase. How she handles that will be the first test and that is what you will want to watch.
Last, I would mention that Cardoso was the perfect dent to have sticking around — he is fairly quiet and modest — but Mr. Lula, unless he gets a job some place, unless the UN ships him to Haiti, will be in Brazil on the front pages and seeing how things are going. That is something else to watch.
Senator Jaffer: Listening to yesterday's presenter and then the two of you, one thing that I hear from you is that Brazil has a lot of self-esteem. I heard Mr. Heidrich saying that they would leave the room and Mr. Dade spoke about the talking match between the U.S. and Brazil. The impression you gave me was almost that they were debating as equal partners.
It gives me the impression that Brazil, in many ways, is much stronger internationally than our country. Is that a correct observation? What is it in Brazil that makes them act so strong internationally?
Mr. Dade: I would say it is both perception and reality. There is certainly a perception that Brazil is stronger. Partially, it is the newness. We all love something new — a new idea, brand or partner. Brazil is benefiting from that, to some degree.
It is also a moment where the hyper-power has broken down. The United States has created space in the hemisphere. Haiti is the object lesson in this. That space is being filled nowadays by countries like Brazil. It is a mix between being there at the right moment and a little bit of perception.
We are still the second largest financier of the OAS and the second largest bilateral donor in Haiti, but that is old news and does not capture attention. In terms of substance of our involvement and our investments, they are strong and it gives us some space. However, as we saw with the UN Security Council vote, in today's world, sometimes perception matters a bit more.
Mr. Heidrich: I would pretty much agree. It is also a question of the moment. If we read a lot of what is being written about China and then we look at the 1980s, the same thing was being said about Japan; and no one would say the same thing about Japan today.
The same thing happens with Brazil; a lot of the size of the economy of Brazil has to do with its currency being extremely overvalued. It is suffering horrendously from the primary nature of the economy. It has gone from exporting mostly manufactured products in the 1990s, to exporting its two largest export items of non-processed iron ore and soybeans. That is changing the economy and presenting many problems to policy-makers. The government of Dilma Rousseff will have to deal with that for sure.
Actually, that is an important area where Canada and Brazil can cooperate — the problems of currency appreciation and currency imbalances in the world; and the speculation with oil and mineral prices, et cetera. It is the "Dutch disease'' as economists define it, which is basically the appreciation of the currency and the loss of competitiveness for manufacturing, the loss of jobs. These are things Canada and Brazil have in common.
I do not find Brazil to be that strong over time, in part because of what I just said. Once you discount the currency overvaluation, the Brazilian economy is not larger than the Mexican one, even though it looks like it is twice as big today. If you go to Brazil now, you will find that wages are high but prices are even higher, and once you discount the enthusiasm of Wall Street for Brazil's incredibly high interest rates, which is provoked by government fiscal deficits, then a lot of the external enthusiasm with Brazil deflates. I think there is a bit of exaggeration. At the same time, Brazil is an important player and it is better to engage it now than later.
[Translation]
Senator Robichaud: When you mentioned trade, you immediately mentioned agriculture as a barrier that might prevent them from sitting down at the negotiating table. How big is this agriculture barrier?
[English]
Mr. Heidrich: It is fairly big, especially in terms of dairies and perhaps the poultry industry. With dairies, it would be pretty much impossible to negotiate with Brazil alone; you have to negotiate with MERCOSUR. The dairy industry is one of the largest industries for Uruguay; it is a fairly large industry for Argentina as well, and also for Brazil. It is not small internationally. The poultry industry is enormous in Brazil; it is one of the largest producers and exporters in the world. That is very important.
In terms of Brazilian policy-making and trade, they tend to go for trade agreements that give advantages to industries that have lots of linkages with the local economy in Brazil. They prefer to have trade agreements that include agriculture and agri-foods because that creates a lot of jobs back home. They care less about agreements on nuclear technology because there are only 3,000 jobs in nuclear technology in Brazil. It does not really matter.
Another question to watch is if Brazil and the rest of MERCOSUR conclude an agreement with the EU that includes agriculture and agri-food in some way — and that is overcoming French, Italian and Spanish resistance — will they then say "look, the EU gave me this; you are Canada and you will not give me the same as the EU? Sorry.''
There is a certain competitive liberalization. Once I made a deal with the big guy and got this, I want at least the same deal from the smaller guy, never less. I hope that answers your question.
Mr. Dade: Agriculture is a larger issue for us in terms of trade negotiations. You can look at the success we have had with the current agenda and you can argue that we have pretty much come close to reaching the limits of how far we can go with bilateral agreements without dealing with the trade issue in Canada. The three biggest potential deals we have on the table — EU, Brazil and Trans-Pacific — will all, in some way, require us to deal with agriculture. The question, I suppose, is which deal do we choose to undertake the battle within this country on price supports? We will have to make some movement.
The article in The Globe and Mail last week about the study by the Canadian dairy board was an interesting opening salvo in this coming battle. At some point, it will be a question of how many dairy farmers we really have in this country. How many communities and how serious will the impact be versus a Trans-Pacific trade agreement, potentially the largest trade agreements in the world? Or do we have this debate vis-à-vis Brazil, a market where there is huge potential in all the parts — in financing for mineral exploration, in so many sectors?
At some point it is coming. The question is when and which battle do we pick to begin to fight within this country on it?
Senator Robichaud: You are not saying that we should negotiate with or sacrifice one sector for the other, are you? That is what I am hearing there.
Mr. Dade: It is coming. For Panama, it was not much of an issue. For Colombia, we are sending down pulses and they are sending up flowers; there is not much of an issue.
Mr. Heidrich: When we are talking about trade policy, we are also talking about compensation policies, which must take into account those who will lose in these trade agreements. It is very naive to talk about free trade just benefiting. It obviously benefits a great number of people, but it can also affect a smaller number of people in a much more than proportional way. Public policy has to take everything into account, including that as well.
Mr. Dade: With the Ricardian equivalence, we will still be better off, no matter what, right?
Mr. Heidrich: Yes, but that will be hard to tell —
Senator Robichaud: Mr. Dade, would you mind repeating? I did not hear your comment.
Mr. Dade: With the Ricardian equivalence, we will still be better off — David Ricardo's theory that even if you lose out, you are getting rid of something in which you are not as efficient. Therefore, resources are better used, even if you are losing. It is an academic argument that does not carry much weight politically. It is the type of thing that will get you voted out of office faster than you can say "David Ricardo.''
Senator Segal: Right up there with formality in terms of what happened when you support the GST and get reduced to two seats.
Senator Downe: We will have a discussion later on the importance of food security and not forfeiting that to foreign countries.
My question is on the role of the OAS. We have heard testimony that the Brazilian government is just paying lip service to the OAS and they want to have associations that exclude Canada and the United States. What is your view of that?
Mr. Dade: We have done quite a bit of work on that subject. One of the few volumes out in English on Latin American multilateralism is available on the FOCAL website. It is an issue we have been following for quite some time, talking to Foreign Affairs and others about, and is one that has preoccupied the hemisphere.
The bottom line of the analysis is that pursuing investments in the creations of new groups, like the Latin American and Caribbean Summit they have put together and the strengthening of UNASUR, are a response to the spaces the United States is creating in the hemisphere. The Brazilians and the Mexicans will say it is not against Canada or the United States but that there are certain issues better discussed amongst themselves. Most other regions have regional forums, so it is not surprising that they have one based both on language and geography.
The reality is that until they start putting in serious investments in these forums they will likely remain idiosyncratic responses to issues as they arise. When the Brazilian take a multi-year lease on the building and start paying staff to man the building for several years, we can really worry about serious challenge to the OAS.
The problems within the OAS come not from those groups but from dysfunction within the organization. The organization is in need of serious reform. The Americans are unable to do this. The Latin nations each have their own diverse interests in certain things about the OAS. Reform of the institution will have to come from someplace else, most likely us pushing a reform agenda.
The threat to the OAS is internal as much as it is external. From the outside, it is nice to hold a meeting or to convene a summit, but the long-term follow-up requires an institutional presence, and the Brazilians have not yet developed this hemispherically.
Senator Downe: I understand we are the second-largest contributor to the OAS.
Mr. Dade: Yes, we and the Americans are 75 per cent of the budget. Brazil is third. Do not take these figures as being literally accurate, but we are roughly 16 per cent and Brazil is still under 10 per cent — I think 9 per cent or 8 per cent — in terms of budget for the OAS. That is 16 per cent of the total budget.
Senator Downe: What is the actual cost?
Mr. Dade: It is $30 million, including special funding, but the vast majority of our money is special funds. The core contribution is around $10 million and $20 million for special funds, but I have to get the exact figures for you. That is the ballpark.
Senator Downe: It is in the $30 million range, then.
Mr. Dade: Yes.
The Chair: There was a lot of talk that the OAS is not functioning well and the factor was the U.S. and Cuba. Then, more recently, the role of Venezuela was factored in. Do those two countries impact the efficiency and the operations of OAS as it was contemplated?
Mr. Dade: No, they capture the headlines but the real issue with the OAS is a mandate that includes practically everything under the sun. They have a development agency and a development initiative. Why do they have one when you have the World Bank and the Inter-American Development Bank literally three blocks away. The Caribbean wants access to development funds and they will not let anyone get rid of that. They are also focused on democratic issues, governance issues, crime and the environment.
The OAS is trying to do too many things and that the major impediment. You also need 32 countries to agree on something, and that is always difficult, especially when talking about reform. Therefore, the reform agenda has been stalled because of that. The Caribbean pushing for the continuation of development money is a perfect example of the types of political issues.
I am sure I do not have to tell this committee about the need for the political dimensions of things like aid and money flowing back to your island. That can impede reform.
The Chair: We have not joined the Inter-American Court of Human Rights. Does that impact our influence in either the OAS or through the OAS to South America?
Mr. Dade: To some degree it impacts our authority to speak on certain issues. However, practicality, I would say it has not hindered us in terms of taking a stand on human rights, being involved in Honduras or other things.
The Chair: You say that Brazil is not in the same sort of conversation we are on many issues, and we may not have the impact on them or them on us; they are more low-key on human rights, et cetera. Is it not a fact that many of the issues that the Brazilians have struggled with such as human rights, freedoms and gender equality are the same issues we have been espousing? Perhaps they are the same values but presented differently, operationally and vocally.
Mr. Dade: In terms of the corporate social responsibility agenda in the hemisphere, the Brazilians and Brazilian companies are doing some amazing things in terms of being leaders and advocating for CSR. You can look at programs at DaimlerChrysler that are working with local communities and integrating them into supply chains. The values crop up in interesting and different ways.
I think Brazil has a different sensitivity, having come out of an era of military dictatorship and working very closely with countries in the developing world. Their sensibilities and points of view are a bit different. Where you stand on an issue is often determined by where you sit, and Brazil sits in a very different place than us, so it is not surprising there are some differences.
For things that are more linked to globalization, like corporate social responsibility and good business practice, I think we share a lot and they are opportunities out there, too.
Mr. Heidrich: I want to add a couple of things. On the questions of human rights, yes, I think the possibilities could actually be very good. It is just that we have to understand that the distance with Brazil is significant. However, we should not see Brazil as a sort of "black box'' and completely and fully represented by its current government or by the government of Cardoso or Lula.
There are plenty of currents, and there is a very strong current of opinion inside Brazil that truly and systematically criticizes the low-key approach that the Government of Brazil has on human rights violations globally. It also criticizes the double standards the Brazilian government has had in issues of Latin American democracy. For example, they criticize strongly that the government took such an activist approach in the case of Honduras, saying, "Well, we always criticize others for intervening in Latin American countries and we are intervening in a Latin American country. What is not good for them is okay for us? What is the statute?'' It is also being observed by other Latin American countries that they are actually not that comfortable with its activist approach, even if they agree with Brazil.
There is quite a bit of nuance. I think it would depend on what partners Canada would choose to work with inside Brazil, on what kind of agenda and what kind of common ground one could build.
In regards to the Organization of American States, I think the main change with UNASUR and with the other institutions being created from the south is that there is basically competition for environments in where to discuss things. OAS really has to run for its buck now. It could be that the meetings in UNASUR or in other organizations would take some of the agenda away from OAS.
One should never underestimate the very presidential tradition that is currently in place in Latin America when we have OAS delegates talk in one way or another. That does not say nearly as much as having the President of Honduras meet with the President of Guatemala, because that is where the "stew'' is cooked.
If you look at the discussions within UNASUR on a democratic clause, you will find that democratic clause is quite different from the one defined in OAS, and that democratic clause comes out of a purely South American definition, pure South American consensus. What we are talking about is regime creation. There is a creation of definitions that will become operative and later will be the ones that will be actioned if there will be some condemnation on the breakdown of democracy, for example in Venezuela, Ecuador or Colombia or something like that.
Senator Segal: Mr. Dade, I would like to pursue the continuing reference, if I can call it that, in your presentation on the comparison of Brazil and Mexico.
It strikes me that we have a trading arrangement with Mexico and the United States which is at one level operative. We have imposed some visa difficulties on our Mexican friends which I think are quite reprehensible on the part of the Government of Canada, problematic in my view. A Speaker of the Mexican Senate who had to prove he had a home, an income, and that he was not trying to sneak in to be a cab driver in Toronto, or some such thing, thanks to our Immigration Department. Those kinds of bilateral relationships can become deeply problematic, and they reflect on both countries in some respects, the Mexicans having problems with immigration consultants who were sending people on trips that were of no great value or substance.
Are there those kinds of irritants between ourselves and the Brazilians upon which we can act constructively, in your judgment? Are there issues we might address in the recommendations we develop around this committee table that could smooth away those kinds of irritants, understanding that as competitors there will always be larger questions? Are there some of those that would suggest themselves from your perspective?
Mr. Dade: Certainly, the history of the relationship with Mexico, some of the institutions like the Canada-Mexico Partnership are things we would look to adapt. However, some of the issues that have become, as you say, problematic, such as movement of people across the border, could be addressed in advance. Visa regimes, we have a special initiative on the Canada-Mexico relationship. Bill Graham is chairing it on this side and Rosario Green, former foreign minister, is chairing on the Mexican side. One suggestion coming out of this is the creation of a Canada-Mexico NEXUS program in response to the visa issue, a more forward and dynamic solution to having people move across the border rather than the response with the business visa which is something to which the embassy has to invite a business to participate. A NEXUS program, you on your own initiative apply for that. We can take a look at those types of things.
When the Americans imposed a requirement to be fingerprinted and photographed when you came into the United States, Brazil was one of the first countries to respond with requiring Americans to be fingerprinted and photographed when they came into Brazil, and there were several instances of Americans coming into the country highly upset. There was a famous one with the American Airlines pilot who gave the finger to the camera and was tossed into jail.
You will have a slightly different response on these issues with Brazil, and you will have to take the look at our history with Mexico and adopt proactive initiatives, of which there are quite a few.
The Chair: What you pointed out in the last example is their status, and how they are viewed is extremely important to them and even more sensitively now. You certainly broadened our debate and our understanding of both Brazil and the region and Canadian possibilities.
I would hope that our witnesses as well as our senators will think more creatively. If we look at Brazil, through Cardoso and Lula and presently, it sees itself differently and has identify new levers, new methods as opposed to rebuilding or readjusting the existing ones.
We have been studying BRIC. There is the American approach to India. The United States started to look at India differently a lot earlier than we did and changed its policy and the nuclear issues, et cetera. There have been responses to China earlier rather than standing back and watching it.
This committee is looking to assess our relationship with Brazil, assess Canada's strengths and Brazil's strengths to see if there are new options and ways of looking at issues rather than the pre-existing ones.
NEXUS was created by someone after all of this tit for tat on visas did not go anywhere, and there must be creative minds somewhere, and we know some of them are in your two institutes.
We will continue to look at your expertise and hopefully you will able to add to our debate not only today but in the future if there are proposals or recommendations for new initiatives or perhaps strengthened initiatives in our relationship with Brazil and Latin America, Central America or South America or variations of them today.
(The committee adjourned.)