Proceedings of the Standing Senate Committee on 
Foreign Affairs and International Trade

Issue 12 - Evidence, November 25, 2010


OTTAWA, Thursday, November 25, 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.

[Français]

The Chair: The Standing Senate Committee on Foreign Affairs and International Trade is empanelled to continue our study on the political and economic developments in Brazil and the implications for Canadian policy and interests in the region and other related matters.

Before I turn to our witness, this would be, if he were here, Senator Stollery's last meeting of this committee. Senator Stollery has been on the committee as long as I have. I think almost his entire tenure in the Senate has been spent with the Standing Senate Committee on Foreign Affairs and International Trade. He has been the chair and deputy chair. I would have appreciated, on your behalf, to have extended our appreciation for his years of service. As Senator Stollery was unable to make it to this meeting, I am asking for your concurrence in preparing a letter of appreciation that we will send to him. I am sure there will be no discussion on that, and agreement.

Hon. Senators: Agreed.

The Chair: Thank you. I am sure we will see Senator Stollery from time to time in many countries and perhaps back here in the Senate. We wish him well in his retirement and his new career.

Today, on the study on Brazil, we have Associate Professor Paul Alexander Haslam, from the School of International Development and Global Studies, at the University of Ottawa. We began yesterday by hearing from government officials. We are at the exploratory stage of looking at Brazil as it is now and the implications to Canadian foreign policy.

Paul Alexander Haslam, Associate Professor, School of International Development and Global Studies, University of Ottawa, as an individual: I would like to focus particularly on some of the challenges related to the prospects for improving or developing Canada-Brazil cooperation in international affairs, broadly speaking.

The core of my argument is that Canada and Brazil have quite different approaches to international relations in general, and multilateral institutions in particular, that create certain challenges for cooperation. It is my belief that understanding the nature of these differences will be useful to improving the bilateral relationship.

The presentation will briefly touch on the following issues: first, a brief summary of past challenges in the Canada- Brazil relationship; second, explaining the divergent national approaches to foreign policy of the two countries, obviously focusing on Brazil, since we know about our own policies; and, third, explaining how these divergent approaches affect prospects for cooperation, looking at a number of major issues in the inter-American system.

Canada has, on numerous occasions, stated its intention of improving its economic and political relations with Brazil and other emerging powers, including within the re-engagement strategy articulated by Prime Minister Harper in 2007 and also the preceding government's international policy statement of 2005.

The academic literature, which is thin on this topic, has suggested that the two countries are natural partners, often described as middle powers with a strong commitment to multilateralism, trade, democracy and human rights. However, this seems to be an optimistic interpretation, as the relationship has been marked by a number of diplomatic and trade irritants, most notably related to government support of the regional jet sector. There have been a number of much more minor diplomatic irritants as well.

It is my contention that the unrealized potential of this relationship is largely due to different approaches for foreign policy and multilateralism. In particular, I would argue that Brazilian foreign policy has historically been instrumental, that is to say, it has been focused on quite a narrow economic definition of the national interest, particularly concerned with advancing economic development in Brazil. It is also increasingly an approach that is revisionist in the international relations sense of that term. That is to say that Brazil is seeking changes to the structures and institutions of global multilateralism.

Brazil has been instrumentally concerned with the promotion of its economic development and attaining prestige in the international system. Support for multilateral initiatives has often been dependent on a hard-headed assessment of their contribution to Brazil's economic development. This has been particularly evident in Brazil's stance in global and hemispheric trade negotiations.

Brazil's engagement with international institutions has also been revisionist in the sense that it has sought changes to the global order that accommodate its international aspirations. This was seen as early as the 1960s with its support for UNCTAD, the UN Commission on Trade and Development, as an alternative forum to the GATT, which later became the WTO.

With the return to democracy, and particularly the presidency of Fernando Henrique Cardoso between 1995 and 2002, Brazil's objective became even more revisionist insofar as it sought recognition of its status as an emerging power. The most obvious manifestation of this objective has been Brazil's campaign for a permanent seat at the UN Security Council.

Under Cardoso, Brazil began to emerge as a leader of Latin America and sought to leverage its regional leadership into a power resource in global and regional negotiations on trade, both in the Free Trade Area of the Americas negotiations and the WTO negotiations, both of which have pretty much collapsed by this point.

President Lula da Silva, who was replaced in elections just last month, continued in this vein, adding to the foreign policy mix an emphasis on south-south dialogue and leadership. In conjunction with other emerging powers, Brazil was able to use its influence to, one could say, derail the WTO Doha Round talks in Cancun in 2003 and also to bring the FTAA negotiations to an end a little earlier in 2003 in Miami.

We also see South America with Brazilian leadership trying to consolidate itself as a political bloc and counterweight to the United States in the Americas. According to the reports I have read, it is expected that the new president, Dilma Rousseff, will continue this approach.

To underline the difference with Canada, in contrast, Canada's tradition of foreign policy engagement may be described, with variations, obviously, more as ideational and defensive. I say ``ideational'' because in the last 30 to 40 years Canada has sought, among other things, to promote Canadian values abroad through approaches such as peacekeeping, human security and being the helpful fixer or honest broker. Brazil has not seen the same kind of values- based shift in foreign policy, as the Brazilian Department of Foreign Affairs, Itamaraty, remains quite autonomous from public opinion.

In a sense, Canada also has a defensive or status quo position in the international system. Canada has no pretentions of attaining great power status or revising the global power structure that emerged following the Second World War. Instead, we sought to exploit our privileged position as a middle power with the ear of the United States. Canada remains essentially satisfied with the post-war status quo. This is different from Brazil, which is unsatisfied with the post-war status quo.

What are the implications for cooperation of these different approaches to foreign policy?

I would argue that cooperation is most likely in domains where the task at hand can be interpreted and justified through the divergent foreign policy traditions of both countries. It is least likely in domains where both normative and strategic differences exist.

For example, one of the least likely cases of cooperation was the Free Trade Area of the Americas in the early 2000s. Here, Canada supported a trade project that sought to expand the NAFTA template southwards and continued to include fairly contentious provisions — contentious at a hemispheric level, not necessarily in Canada — such as Chapter 11 that regulated foreign direct investment.

Brazil opposed the model, claiming that the NAFTA model would restrict its ability to make policy in the public interest, and opposed some of the substantive limits on those concessions, within the FTAA negotiations. That is to say that there was not to be agricultural liberalization or tighter regulation of anti-dumping measures, both of which were considered strategic by Brazil. It also opposed, on the political level, the implications of consolidating U.S. economic hegemony in the region, which it saw as undermining its own leadership aspirations.

Canada is also another area of potential cooperation as Canada has a long-standing engagement with the Organization of American States, but I would argue that this is also an area where we are only likely to see a medium level of cooperation. It is better than free trade, but perhaps not as good as some other options.

Here Canada has been an active promoter of regional multilateralism and democracy, which culminated in the signing of the Inter-American Democratic Charter in 2001. In contrast, Brazil has historically been lukewarm to the Organization of American States, OAS, seeing it as an organization that facilitates American influence and which potentially undermines the sacred regional principles of non-intervention and sovereignty.

Brazil has generally been in favour of keeping the OAS and its machinery weak, seeing democracy promotion as a matter of internal and national debate, not external regulation. Again, this is quite different from the Canadian position and it reduces the likelihood of finding common ground in developing the OAS as a forum for regional cooperation.

However, high levels of cooperation have been evident in areas that engage both countries' foreign policy traditions. Here I would point particularly to the UN Stabilization Mission in Haiti. Brazil leads the mission, and this is a way for Brazil to promote its international prestige and improve its credentials for making a bid for a permanent seat at the Security Council. This also works well, of course, with Canadian priorities, which are related to promoting multilateralism, Canadian values abroad and, in the particular case of Haiti, engaging domestic lobbies in Montreal. Interestingly, while our countries are cooperating in Haiti, they are not motivated by the same logic, which is the point I want to underline.

To conclude, in this respect, one of the challenges for foreign policy in cooperation with Brazil is that Canada must recognize and support Brazil's aspirations. I want to underline that this is not the developing country that emerged from a lengthy dictatorship a quarter century ago. Brazil is now a vibrant consolidated democracy and an emerging global power that demands recognition.

The Chair: Thank you.

[Traduction]

Senator Fortin-Duplessis: I would like to know if Brazil is confronted with sub-regional rivalries, such as we have seen in India and China?

Mr. Haslam: Yes, that certainly is, indeed, the case. Brazil, historically, has always been in competition with Argentina to be the leader of South America.

However, Brazil is now so much bigger than Argentina. Argentina has a population of some 40 million people, whereas Brazil's is of 195 million. I believe that Argentina has pretty much abandoned the idea of being the leader of South America.

It must, however, be said that Argentina does not support Brazil's request of a permanent seat on the Security Council. There therefore still remains a certain rivalry. There is also a rivalry with Venezuela.

Venezuela has hopes of being the leader in South America. In the case of Venezuela, it is somewhat different, because the government in place truly aims to promote a certain socialist vision of development which generally goes against the position of Brazil, which is much more pragmatic.

It must also be said that Mexico, it too, has certain expectations that it will be a leader in Latin America. However, my interpretation of the situation is that Mexico is finding itself more and more marginalized, given that it has tied its future to that of the United States and of Canada with NAFTA.

Senator Fortin-Duplessis: I would also like to know if you might provide an answer to the following question: in your view, what are Brazil's relationships with the other emerging countries, namely Russia, China and India? What are the relations and relationships? Are they close friends? Is there a lot of trade with these countries?

Mr. Haslam: There is more and more trade between China and Brazil in particular; China is perhaps the second or even the top trading partner of Brazil. As for the Brazil-China relationship, there is an element of competition.

The Brazilians and Latin America, in general, are rather focussed on China's natural resources, whereas China is more interested in the manufactured goods of Latin America.

Latin American countries produce manufactured goods, and Brazil probably has the most developed industrial structure in the region. They also see, clearly, a competitive potential for markets with China.

As for the stability of relations, there was some agreement between these countries to advance certain issues within the context of the World Trade Organization negotiations. However, it was enough to halt progress, but it is now much clearer that it could lead to an agreement that would please all countries.

For example, Brazil is demanding the liberalization of trade and agriculture. India is not in favour of this. There are potential fractures in this relationship. I believe that, for the time being, what is in place are rather vague compromises, and it is possible that that might change in the future.

[Français]

Senator Wallin: We are starting to look at a couple of questions on this study.

I have worked with a group that works in Latin American and my sense is that there is a growing distinction between Latin and South America, both by the middle chunk and those who consider themselves south. I would like to hear your opinion on that point.

Second, on the policies around MERCOSUR, we know that President Lula was committed to no bilateral deals. We are all a little uncertain about the new woman in charge.

How do you think that plays into the politics of their own regional attempts to become the superpower?

Mr. Haslam: In terms of the division between South America and the rest, I think you are right, there is a distinction. For example, in the recent signing of trade and investment agreements there is essentially now a NAFTA economic space that expands to Colombia and Chile. Central America is included in there, and Peru and Chile as well. Those are essentially NAFTA-style agreements that reach that far down.

There is a divergence politically because much of South America sees Mexico as having thrown its lot in with the United States, and they interpret that as not having been very successful for Mexico. We can note with the recent financial crisis that, of all the Latin American countries, Mexico has weathered it worse than anyone, probably partially because it is so tied to the American economy. There is an economic division, but that also underlines a political division.

I think that South America is increasingly thinking of itself as a region distinct from North America. Of course, Mexico would prefer to be considered part of North America, though we tend sometimes not to use the language in that way.

I do think there is an emerging South American identity and conception of South America as a bloc, which has been helped, to a certain extent, by the recent shift to the left in the region. There are a number of governments that have, broadly speaking, comparable places on the ideological spectrum. President Chávez is obviously at a rather extreme point, but the others are much more pragmatic.

The relationship to MERCOSUR has always been a troublesome relationship for Brazil. I think that Brazil is committed to maintaining MERCOSUR as a negotiating bloc. I think the issue is only whether they wish to add countries to it as a negotiating bloc, but I do not think they would allow any individual country to be picked off individually by a trade agreement.

Brazil sees MERCOSUR as giving it weight in international negotiations. For example, in the case of the FTAA negotiations, it really did insist that the MERCOSUR position be common, and it did the negotiations to ensure that MERCOSUR presented a common front.

That being said, many of the countries in MERCOSUR are very unhappy with the progress of the union. It has not developed as quickly or as deeply as one might have expected. For example, Uruguay would probably be happy to take a trade agreement with the United States separately; it is just being prevented from doing so. It already has a bilateral investment treaty with the United States, which also caused some problems.

The other interesting thing about MERCOSUR is that it supposed to be a common economic space. They do not even have investment disciplines that cover that space. They did sign a protocol.

Senator Wallin: Canada is not one to talk on that score either.

Mr. Haslam: Yes, they did not ratify it. I think MERCOSUR remains important to Brazil's strategy. A good part of it is leveraging its leadership in Latin America on a global stage.

Senator Wallin: How would you describe the new president in terms of her position? Is she protectionist minded? Is she likely to try to use the — and I mean this only somewhat pejoratively — bully tactics of Lula?

Mr. Haslam: I would be hesitant to characterize Lula as being protectionist. It is certainly true that Brazil had a different evolution of trade liberalization than the other countries. In the early 1990s, the other countries in Latin America dropped their tariffs, often with disastrous consequences in the short term. Argentina is estimated to have lost something like 20 per cent of its manufacturing capacity as a result of dropping its tariffs unilaterally.

Brazil claims that they do not want protectionism but, rather, a fair deal. They would argue that the subsidization of agriculture and anti-dumping measures against steel imports and that kind of thing, in which Brazil is very competitive, are actually not free trade. Their argument is that if we are going to have a trade deal, it must be a trade deal that truly is free. From Brazil's point of view, they are a very efficient agricultural exporter. For them, if they are not getting free trade on agriculture, it is not worth doing. That is what it comes down to.

I see it less as being about protectionism than about seeing that a kind of liberalization occurs that is beneficial to Brazil. That being said, they are very pragmatic.

Senator Wallin: That does shines a light on our own internal subsidy programs in dairy, et cetera.

[Traduction]

Senator Robichaud: If I understand what you are saying, Brazil has softened its position towards the WTO, in that it is not as harsh towards the World Trade Organization in what it is attempting to do. Am I right?

Mr. Haslam: Let us say that that is perhaps the reason why negotiations stopped after Cancún. It was because of several factors: first, because of the fact that there would have been no favourable market for agriculture for Brazil, and the other issues, the Singapore issues. Indeed, the idea was to increase protection for investment and intellectual property. The other issue was that intellectual property was the most problematic investment for Brazil. I am not convinced that softening the position vis-à-vis the WTO is necessarily an issue. It is simply that Brazil, if there is an agreement in the Doha round, wants this agreement to be profitable, to benefit the country and its exporters.

Brazil is one of the most active users of dispute resolution mechanisms at the WTO. Brazil is very committed to the WTO, but it is clear that it viewed the last round of negotiations as something that promised much for developing countries, but that delivered very little. It was even said that the Doha round was the development round, and therefore the big developing countries are insisting there benefits for them before they sign anything.

[Français]

The Chair: I want to ask a few unrelated questions. The first is on Brazil's lusophone linkages. As I said yesterday, Brazil is always curious. It does not look to Portugal as the mother country. Quite the opposite, it is Portugal that reminds Brazil of its roots and wants to be included. There are many possibilities now with Angola, Mozambique and trade through Portugal into Europe.

Can you comment on the lusophone links and Brazil? President Cardoso and then President Lula, made use of these links in an economic sense.

Mr. Haslam: That is an interesting question. I am not sure that I can answer it well.

You are correct about the relationship between Portugal and Brazil. It is sort of like the relationship between the United Kingdom and the United States. The colony became the master, in a certain sense, which is certainly the case with Portugal and Brazil.

With regard to its links to the lusophone world, we must look at Brazil as a country that is interested in becoming a big global player, and it will use whatever tools are at its disposal to leverage its influence on the world scene. In a sense, that is probably not so different from Canada. We are also quite willing to work through the Commonwealth and the Francophonie to increase our influence. I think that Brazil has a similar objective in mind.

The Chair: You talked about Mexico. Mexico kept its links with Spain and is influential in restarting that link using the EU influence. You do not see any of that kind of thing in Brazil with Portugal into Europe using those levers?

Mr. Haslam: I am not certain. I do not think I can answer that question.

The Chair: To what extent do we give credit to President Lula for the changes in the new Brazil, or will his legacy be that he continued what President Cardoso started?

Mr. Haslam: That is a great question. I think it is a bit of both. The great legacy of the Cardoso period was, without a doubt, the taming of inflation or, more particularly, hyperinflation. Here we worry about inflation a little bit, but in Latin America hyperinflation was extremely damaging to the poor, because the poor have no way of sheltering their assets from rampant inflation.

In places like Argentina, where there was 3,000 per cent inflation per year, between getting your paycheque and going to the bank you actually lost money. People would spend money on washing machines and such things as a way to create an asset that held its worth.

That is a huge triumph of the Cardoso administration. It is beginning with the taming of inflation that you start to get more progressive growth that trickles down to the poor.

Another thing is that Cardoso began targeted social programs called conditional cash transfer programs. These are programs that target poor families. The families receive a monthly stipend in exchange for meeting certain conditions such as sending their children to school and going to the health clinic or to nutritional seminars. The idea is to break the intergenerational cycle of poverty by forcing the poor to do things they might otherwise not do. For example, they might send their children out to work instead of sending them to school.

President Cardoso began that, but President Lula consolidated and expanded it. I think President Lula deserves recognition for the expansion of these programs that have effectively changed the way that growth in Brazil maps onto income distribution. For much of its history, Brazil has been known as one of the most unequal countries of the world. During much of that period, the growth has principally benefited the middle classes. Brazil has a welfare state, and that principally benefits the middle classes, so the poor never got any traction in the system.

The innovation of Cardoso, which was pushed by President Lula, was ensuring that the people at the bottom are benefiting from growth. There were targeted conditional cash transfer programs and massive infrastructure spending which enabled the hiring of people from relatively humble backgrounds. This has changed the game completely.

Growth has mapped onto income distribution since 2002 when President Lula came to power. The poorest 10 per cent have experienced something like 15 per cent growth in the six years between 2002 and 2008.

If you look at the people in the top 10 per cent, they benefited from around 6 per cent growth. This means that the growth, for the first time in Brazil's history, in the last decade has been targeted on the poor. That is a tremendous achievement that is taking people out of poverty. Unfortunately, income distribution is so unequal in Brazil that it will require many decades of that, but it is good news.

The one other thing that is important about President Lula is the symbolism of having a man who is not elite arrive at the presidency. He was a metalworker. He worked in the unions. That had a tremendous effect. People who always felt excluded from politics in Brazil for the first time could see the potential that even someone with a humble background could aspire to the presidency. For me, that is a reflection of the health of democracies. You see that across the region and not just in Brazil. Those are all fantastic contributions of the Lula government.

Senator Downe: I very much enjoyed your presentation, particularly the points of departure between Canada and Brazil and their perception of what they want to do and how they want to do it.

How does Brazil view Canada, in your opinion? Do they look at North America and see the United States and Canada as sharing the same values and objectives? Do they understand much about Canada?

Mr. Haslam: That an interesting question. One must distinguish between diplomatic core and regular people. I think Canada is relatively unknown, but there is a relatively favourable impression associated with Canada in Latin America in general. In Spanish America, they always refer to North America, but ``los Norteamericanos'' does not include Canadians, so it is something different from the Americans.

That being said, I think that as Brazil is becoming more self-confident on the global stage, it is not seeking to engage smaller countries. They are interested in playing with the United States. They are much less interested in the contribution that Canada would make. That is my impression.

Senator Downe: When we talk about opportunities, your analysis is that they want to play with the bigger countries, and we are not in that category, in their opinion. What role can Canada play to expand our trade, for example? What recommendations do you have?

Mr. Haslam: They are interested in access to the American market, if they are to get access to any market. Part of the problem is that in its Latin American policy, mostly since Canada reengaged with the Organization of American States in 1990, Canadian policy has been pushing concepts and values and types of agreements that Brazil is not necessarily in agreement with. I would point, for example, to our trade agreements. The signing of the NAFTA or the Canada-U.S. Free Trade Agreement typically included protection for foreign direct investment. Brazil, in contrast, has refused to sign any agreement with any protection for foreign direct investment. That is not to say that foreign direct investments are not secure in Brazil, but they do not believe that investors should have a right to binding international arbitration.

One of my areas of interest is investment agreements in Latin America. Brazil is one of only two or three countries that have not ratified a single investment agreement. Argentina signed 50 or 60, and even Venezuela continues to sign investment agreements. Cuba has signed investment agreements. Brazil refuses to ratify investment agreements. They have actually signed some but did not ratify them.

Our model for promoting trade is at variance with their model for promoting trade. That is potentially a problem in terms of coming to an agreement. If there were to be an agreement with Brazil, it basically could not follow the NAFTA model.

The other issue is that we have been strong supporters of democracy and helped consolidate democracy in Latin America after the transition from authoritarian rule in the 1980s. Our approach has tended to be somewhat American to a certain extent, or western European, in the sense that we put a rather large emphasis on procedural aspects of democracy, for example, independent judiciaries and the procedural issues. This is also slightly at variance with the way that Brazil views democracy.

Brazil has been quite firm in supporting some experiments in democracy in the region that have been criticized in Canada for what is viewed as an undermining of procedural aspects of democracy, like separation of powers, freedom of the press, et cetera. Brazil takes what is known as a kind of social approach to democracy, which says that you cannot have full democracy when you have deep inequalities in a society. I do not think Canadians are necessarily in disagreement with that, but they put an emphasis on trying to deal with the income gap as part of what you need to do in order to make people into proper democratic citizens. That is also somewhat at variance with the way that Canada has promoted democracy in the region.

The Chair: I wish to follow up on that. Does it not come from Brazil's history and where it came in the political spectrum? They were much more supportive of the economic, social and cultural covenant rather than the political and civil, and that is somewhat tied to the old Cold War concepts when you played them out in the United Nations.

Mr. Haslam: I think that is true. Most of Latin America has formally in their constitutions some kind of social and economic rights. They are formally embedded in constitutions, but they are not necessarily realized in practice. There is a long tradition in Latin America in general of considering that social and economic rights are the equal of political rights.

There is a debate in the United Nations system about this as well. We have tended to put the emphasis on political and civil rights, partly because they are easier to define. Latin America also continues to put a big emphasis on civil. They consider that civil and political rights are important, but they tend not to say they are necessarily more important than social rights. That is the distinction that I would make.

Senator Mahovlich: Are the Portuguese still immigrating to Brazil? Are they the main country, or is it multicultural, similar to Canada?

Mr. Haslam: I do not know what the current immigration status is to Brazil. Brazil's history has been mixed. In other areas of Latin America, the growing areas of Latin America tend to be attracting immigrants from less favoured parts of the relatively developed world. There was a significant amount of Eastern European immigration to Argentina some years ago. There were not originally a large number of Portuguese settlers. This population was supplemented by the slave trade, which brought a huge number of Africans to work in plantations in Brazil. In the late 1800s and early twentieth century, they opened up to European immigration, much like we did with Italians and Germans, coming out of war-torn or disfavoured positions in Europe.

As for the current immigration, I am not certain.

Senator Mahovlich: You mentioned manufacturing. Does Brazil manufacture a Brazilian car?

Mr. Haslam: In a sense, they do. They have a very developed automotive complex. In fact, you could argue that much like trade between Canada and the U.S., the integration of the Auto Pact brought this integration of the productive structure for making cars in Canada in the U.S. The same happened between Brazil and Argentina. There is this integration. They have an auto pact that underlies MERCOSUR. Brazil, though, does not have its own car company. They have subsidiaries of the major carmakers, much like we do.

What is interesting about Brazil, though, is that for around 20 years now they have been striving for energy independence. They have adapted the engines of many cars produced in Brazil to run on a flex mix that includes a large percentage of ethanol content. As a result, Brazil emerged as a major ethanol producer or people started to recognize Brazil as a major ethanol producer a few years ago when they were talking about alternative ways to create fuel.

Yes, they have a highly developed and sophisticated manufacturing complex. Maybe the best example is not the auto complex, although that is sophisticated and modern, but the regional jet market. If you have flown on Air Canada recently, you have probably known on an Embraer regional jet.

Senator Raine: I am finding this interesting. Looking at the Library of Parliament background material on the major imports to Canada, one is inorganic chemicals. Do you know what that is?

Mr. Haslam: I am afraid I do not. Brazil has a large petrochemical complex, but I do not know what that is.

Senator Raine: That seems to be one of our major imports. Food, coffee, prepared vegetables and fruit are also on the list. As it is such an agricultural powerhouse, can you comment on how their agri-business is set up? When they export, are they exporting raw basic coffee, or are they producing a manufactured food product? Do they have food inspection organizations such as we would want to have for food coming into Canada?

Mr. Haslam: I must admit that I am not much of a specialist on agricultural issues.

Brazil has been an agro exporter of cash crops basically since it was founded. These days, the agricultural export industry is extremely sophisticated. I am talking about huge farms that export enormous amounts of product.

Specifically regarding food inspection, I am not sure. I am certain they have a food inspection agency, although I am not aware of what it is. In many ways, I think of Brazil and Chile as being in a different class than much of the rest of Latin America. They believe in their institutions. They have competent administration, and they do take things like food safety quite seriously.

Senator Di Nino: Your response to Senator Downe with regard to the way that Brazil sees Canada is somewhat different than I had imagined, particularly when you realize that the Harper government has made the Americas a priority. We have had numerous high level visits to Brazil over the last two or three years. We have six trade offices, which is nearly as many as we have in China and in India. Obviously their view of the opportunities with Canada, you are saying, are different than our view of the opportunities that we may have in Brazil. Is that what you are saying?

Mr. Haslam: They obviously think they do have opportunities here or they would not have bought Inco a couple of years ago. There is definitely lots of potential for investment. I am not trying to suggest there is not potential for investment.

Canada and Brazil kind of produce the same sort of thing. We export a lot of agricultural products, and we do a lot of mining. The majority of Canadian outward foreign direct investment is either mining, financial services or telecommunications. That is not to say that there are not other kinds. That is similar to the kind of advantages that Brazil has. There probably is potential for technology sharing, and they are, I believe, our second largest trading partner in the Americas.

Senator Di Nino: Second or third, I think you are right.

Mr. Haslam: I would underline, however, that I am not convinced that the Canadian government has gone about making itself visible to Brazil in the right way. It is true that we do send down high-level missions. As an aside, the former Governor General was mobbed with enthusiasm when she visited. In fact, they referred to her as the ``Queen of Canada'' in the local papers.

Senator Di Nino: Some people here do that as well.

Mr. Haslam: I would note that diplomacy in Latin America is a little bit different than it is here. It is presidential. There is a system of authority. Latin American political systems tend to be highly presidential. There is a lot of power and image concentrated in the president. When we send high-level missions, we send ministers and people that we may consider high level, but it is not clear that they consider them to be high level. I particularly wish to underline that when President Lula was inaugurated, a high-level mission was sent to Brazil in the person of the Speaker of the House of Commons, Peter Milliken, I think it was. That does not make any sense for them.

The other thing I would underline, since it is coming up, is that these presidential inaugurations are deal-making sessions in Latin America. They are not just photo ops. Lots of the Latin American presidents go. For sure, for the inauguration of Rousseff, everyone in the region will be there. It is a place where deals are made. If Canada wants to be seen, then I think it is an issue of the Prime Minister attending those kinds of events.

Senator Di Nino: During the discussions that we have had and our studies on the emerging economies, one of the things that became quite clear is that Canada does not really have a brand that can define it differently than some of the other potential trade and investment partners. Do you feel that we are missing that as well in Brazil? If Brazilians think about Canada at all, do they see something that defines us? We call it a ``brand.''

Mr. Haslam: I think Canada probably both suffers and benefits from the brand of wide-open spaces and nature and that kind of thing. It seems to me that there are a number of areas where there is a good potential collaboration. One off the top of my head would be the beef industry. Brazil is a huge producer of beef, and so are we. Mining is another area.

I would underline that I think we have to recognize that relations with Brazil are not the relations of us as a developed country and them as an underdeveloped country. It is a relationship in terms of business, and at governmental levels, of equals. Their firms are sophisticated, internationalizing and have technology and management practices to offer. Our engagement has to be at that kind of level of essentially looking for joint business opportunities that are profitable to everyone.

Senator Smith: You mentioned Embraer, but I was musing about this before you mentioned it. In terms of the difference in our thinking, several years ago, as you know, Air Canada bought some Embraer planes, in which I have flown numerous times. I find it unbelievable that Brazil would ever buy any Bombardier planes. I suspect there is a fundamental difference in thinking, even if it was the perfect fit. Is there a fundamental difference in the way they think? Maybe the problem is partly Air Canada, but in terms of the analogy, what is your reaction to my point?

Mr. Haslam: Much of Brazil's history since the military government came to power in 1965 has been focused on deepening their manufacturing sector. A large portion of that process has been through state owned enterprises — Embraer used to be state owned — and government procurement. There is still probably a tradition of thinking about it that way.

Senator Smith: My other comment followed on the point Senator Andreychuk was exploring. Three or four years ago, I was sent on a World Bank project to Mozambique. They had about 13 parliamentarians from different countries, and I was the only Canadian, to see how projects were structured to minimize corruption and ensure that money was going to the cause rather than to everyone up and down the line peeling it off.

It intrigued me somewhat. This relates to the Portuguese former colonies. I do not think they are quite like all the Spanish-speaking countries, because there, while the middle-aged people could mostly speak Portuguese, the number one language that they are teaching now in the schools in terms of a second language is English, because they want to plug into that world. Several years ago, Mozambique actually joined the Commonwealth Parliamentary Association, which I think is fine, but I think it was all part of a bigger strategy that English is increasingly a global language, as much as any, and they wanted to connect more. Do you have any sense of that thinking in some of these former Portuguese colonies as well?

Mr. Haslam: Regarding the use of English in Latin America, I have mostly been struck by how little English is known.

Senator Smith: I was referring to Angola.

Mr. Haslam: I have no experience with Angola. I cannot speak to that.

Senator Smith: And Mozambique.

Mr. Haslam: Generally speaking, Latin Americans are quite nationalistic. I have even heard it said that some people, being of a nationalist persuasion, would not learn English because they associate it with the United States.

This is one of the challenges for us too. There is, of course, a language barrier. Not many Canadians speak Portuguese. Certainly when people learn a third language after French, it is probably more likely to be Spanish. You have more access to more countries, I suppose. That is a potential problem. Something that hampers knowledge of Canada in the region as a whole is that English is not as widely used as one might expect in comparison, let us say, to Asia or to Europe.

Senator Smith: Ironically, in Toronto — I will just mention this — there is quite a substantial Portuguese-speaking component, but the largest single part of it is from the Azores. There is an increasing and growing Brazilian population in Toronto too, but the larger part would be from the Azores and some from mainland Portugal too.

Senator Johnson: In terms of your work, would you like to talk about the situation with regard to Canada's global commerce strategy? We have identified Brazil as one of our 13 priority markets to help Canadian businesses meet an increasingly complex and competitive global economy. How what this been in encouraging commercial interaction between Canada and Brazil? How effective has this policy been?

Mr. Haslam: I am not that familiar with that policy, so I am afraid I cannot speak to that specifically.

Senator Johnson: We could find that out, could we, chair?

The Chair: From another witness, yes.

Senator Johnson: Following up on what Senator Smith said about Bombardier and Embraer, are those irritants still there in terms of Canada and Brazil? There seems to be a history of irritants on the trade and investment side. Can you comment further on that?

Mr. Haslam: I certainly have not heard much about that for quite a while. In the end, the question more broadly speaking is that Canada and Brazil are competing for the same market share, the same product. No, I do not see that as necessarily a problem. In fact, I think the broader problem in terms of irritants is actually things that are relatively unimportant but that create potentially a bad feeling. For example, there was a ruling by I believe the NAFTA panel. The Canadian Food Inspection Agency demanded, five or six years ago, that Brazilian beef exports be confirmed to be BSE-free. This was a huge diplomatic event. Newspapers ran headlines decrying, how could the Canadians accuse us of having BSE when there has been no reported case in Brazil? I think we have to be sensitive that there is the potential to make missteps like that, which then, for nationalist reasons, are picked up and played widely. I believe that was the ruling of a NAFTA panel, although I am not entirely certain.

Part of the problem, I think, is that, in Canada, we have had a culture of regarding Brazil as this developing country.

Senator Johnson: That has been our mentality.

Mr. Haslam: It has been our mentality. It is no longer true, but we continue to sometimes act in that way without engaging Brazil at the kind of level and with the kind of gravitas that it deserves.

Senator Johnson: That is a very good point. Thank you.

[Traduction]

Senator Robichaud: We heard yesterday that 50 per cent of the population is middle class. You are telling us that 10 per cent live in poverty and that certain interventions have helped these people overcome their situation. Would it be correct to say that these people have been pulled out of this great poverty, or is there still an enormous amount of work to be done?

Mr. Haslam: There certainly is an enormous amount of work yet to be done. When we talk about the poorest level based on income distribution, the 10 per cent poorest receive less than 10 per cent of the average income in Brazil. I believe that the average income is approximately $10,000, and therefore the poorest of the poor have an annual income of less than $1,000. There is a tremendous amount of work to be done before they become consumers, that is for sure.

It is important that people begin to climb the ladder. We are not talking about the emergence of a middle class towards the bottom, but we can talk about people who can begin to be able to buy things that are not just the basic necessities.

Senator Robichaud: We talked about agriculture. In your opinion, what are the major differences between Canadian agriculture and Brazilian agriculture? Could you talk to us a bit about that?

Mr. Haslam: I think that question would be better directed to someone else.

[Français]

The Chair: We will have other witnesses. I do not think they started with family farms. That may be one of the underlying issues that we will look at.

[Traduction]

Senator De Bané: Which is the richest state? What is its population?

Mr. Haslam: I am not quite sure which state it would be, but the richest states are the ones in the south.

Senator De Bané: Sao Paulo?

Mr. Haslam: Generally speaking, it is probably the more southern states, and the poorest states are in the northeast.

Senator De Bané: Those more southern states are where the industrial heart of the country beats. I believe that there is in place a rather large German community.

Mr. Haslam: Yes.

Senator De Bané: When one compares the per capita income of the states responsible for the industrial production of Brazil, is there a major difference with Canada or is it rather close to the Canadian per capita income?

Mr. Haslam: I believe there remains a rather large difference, even in the richest states. It is obviously not as large as in the north, where the average income is very low, but I believe it must be said — there is a certain income level that encompasses a good many elements of the industrial society, an industrial society that is urban, sophisticated, with sophisticated tastes. So all of that exists. That can exist with an income that is lower than here.

Senator De Bané: When we look at this country, we see its potential, a population that is six times that of Canada, and the prospect of an agreement for 2011, from which Canada and the United States are excluded.

Given the country's potential, its population and its natural riches, will it rather be a competitor for Canada than a partner?

Mr. Haslam: That is certainly a possibility, but we could say the same thing of the United States. Even though the United States or American companies are our competitors, we can have them as partners.

I believe that it is also the case with Brazil. Yes, we are going to be in competition with Brazil in the global market, but it would probably be in our interest to be more engaged with this major power before it becomes even larger, in order to have a better relationship than in the past.

Senator De Bané: If you have statistics for the per capita income level in the southern states compared with Canada, I would be interested in having them.

Mr. Haslam: I have taken note of that.

Senator Fortin-Duplessis: I would like to know your opinion on something, even if I am not certain that it is your field of endeavour. I read somewhere that the Brazilian economy has shown an increase of close to 10 per cent for the second quarter. Do you not think there might be some risk of the economy overheating?

Mr. Haslam: That is certainly a possibility, but I do not think I can truly give an answer. I am not an economist and it would be difficult for me to answer that question.

Senator Fortin-Duplessis: Very well. Might we talk a little bit about corruption? Is there a lot of it?

When we went to China, we saw that there was corruption. Judges can sometimes be bought, and things do not always go so well in other countries. Have you heard say that there is a lot of corruption in Brazil?

Mr. Haslam: There is certainly corruption in Latin America in general. In my view, the problem is less one of corruption than of bureaucracy, and the bureaucracy is very bureaucratic. It is sometimes very difficult for projects to move forward. I believe that, overall, Brazil is making an effort to eliminate corruption.

It is my belief that corruption probably exists more at the local level, at the municipal level, for example. But, it must be said that there have been many experiments with a view to eliminating corruption.

You have perhaps heard talk of the participatory budgets that several cities in Brazil have tried. It is a way of engaging the people in the budget. This was shown to be a very effective way of eliminating corruption in the cities.

Clearly, it is not all the cities that indulged in this exercise, but I nevertheless believe that it is clear that Brazilians are seeking to reduce the corruption problem.

[Français]

The Chair: Dr. Haslam, thank you. You have certainly given us newer and different perspectives on Brazil, and much to think about on our Canadian foreign policy. I appreciate your attendance on rather shorter notice than you would have wished, but we wanted to get the study going. Thank you very much for your evidence.

(The committee adjourned.)