Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 13 - Evidence, December 1, 2010
OTTAWA, Wednesday, December 1, 2010
The Standing Senate Committee on Foreign Affairs and International Trade met
this day at 4:20 p.m. to study the political and economic developments in Brazil
and the implications for Canadian policy and interests in the region, and other
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: Honourable senators, we have three items of business for
the Standing Senate Committee on Foreign Affairs and International Trade. The
first item is to elect a deputy chair, as Senator Stollery has retired; the
second item is to continue our study on Brazil; and the third item is to go in
camera for the consideration of a draft report, if members are agreed. It can be
set over to another day if members are not ready. As senators recall, we had the
report before us and made suggestions for changes. The committee asked that it
be returned with those changes.
I understand that you received copies of the amended report yesterday. I have
looked at it and have a few changes to recommend, but they are more editorial in
nature than substantive. If you are prepared, we will go to the first item, the
election of a deputy chair; second we will proceed with our study; and third, we
will go in camera to consider the draft report.
Senator Fortin-Duplessis: Madam Chair, may I nominate someone?
The Chair: We have a proposer.
I do not hear disagreement with the third item on the agenda, so we will
follow that order.
The first item of business is the election of a deputy chair. I am looking
for a nomination.
Senator Di Nino: Chair, it is my pleasure to nominate the Honourable
Percy E. Downe as deputy chair of this committee.
Senator Fortin-Duplessis: I also wanted to nominate Senator Downe.
The Chair: Are there other nominations?
The Chair: I declare Senator Downe Deputy Chair of the Standing Senate
Committee on Foreign Affairs and International Trade.
Senator Fortin-Duplessis: Congratulations.
Senator Di Nino: Is it congratulations or condolences?
Senator Downe: Yes, congratulations.
The Chair: It depends on what day. At the moment, it is
"congratulations.'' Senator Downe has worked with the committee, has been on
the steering committee and knows his way around the issues that we have been
studying and continue to study. Welcome to the position of deputy chair. I look
forward to working with you.
Senator Downe: I look forward to working with you and whoever sits as
the third member of the steering committee.
The Chair: Senator Finley is the third member of the steering
committee. He has been absent due to illness. We anticipate his return when we
recommence in the new year.
Until I hear otherwise from either Senator Finley or the leadership, we will
continue as we are. The chair and the deputy chair will struggle without the
third member for this short number of weeks.
We will turn to the continuation of 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 us we have, as a individual, Jean
Daudelin, Assistant Professor, The Norman Paterson School of International
Affairs at Carleton University. Welcome to the committee.
I understand that your current research focuses on property rights and
conflict, on the development and conflict implications of the government revenue
composition and on the comparative foreign policy of Canada and Brazil.
I assume then that you have been looking at rights, taxes and foreign policy,
and the implications for Canada. I understand that, previously, you researched
religious movements in Brazil, indigenous politics, urban violence, economic
integration and regional politics. You come before us well qualified to present
your expert evidence. Welcome, Mr. Daudelin, please proceed.
Jean Daudelin, Assistant Professor, Norman Paterson School of
International Affairs, Carleton University, as an individual: Thank you,
Madam Chair, for having me and especially for reminding me that I should have my
résumé translated to make it legible and understandable, even for my colleagues.
In the next five minutes, I will go over the most important elements of a
short document that I prepared for you and that I am told will be sent to you
soon. I will try to briefly describe Brazil's rise in power: the foundations of
the rise, the constraints Brazil faces and what it will all mean for Canada. I
will conclude with how these changes will affect Canadian foreign policy.
What is Brazil's place in the world today? There is a lot of talk about
Brazil being an emerging power, a major power of the future, and so on. For all
intents and purposes, the question has been answered: Brazil is one of the few
major world powers that are involved in almost all international issues, be they
issues regarding trade, global governance or the environment.
Several years ago, Brazil showed that it was more than capable of forming
very effective coalitions that have enabled it to, among other things, impede
the negotiation of the Free Trade Area of the Americas and to play a central
role, if you will, by curtailing the multilateral negotiations process at the
World Trade Organization. Recently, Brazil has shown that not inviting it to
participate in discussions on nuclear issues could be very embarrassing for the
major powers, as was the case with the discussions on Iran, which I can come
back to if you wish.
What are the reasons for Brazil's rise in power? The first is an amazing
amount of natural resources and a great geographic location, literally. Brazil
is a huge country with a population of 190 million that is growing slowly but
steadily. It is younger than Western countries. It is a mining, energy and
agricultural power, and, to a lesser extent, but still significantly, an
industrial power. This is certainly the first reason for Brazil's rise in power.
The second reason is its development policy. Since 1994, or thereabouts,
Brazil has had extremely effective economic and development policies, especially
in terms of their effect on the poor. Brazil's poverty rate has declined
significantly over the last 10 years. The growth rate in Brazil's poorest
population classes is comparable to China's. However, in contrast to China and
most other rapidly growing countries, most of Brazil's growth is focused in its
poorest population sectors.
The third element of great importance in the Brazilian rise to power is its
relative insulation from economic and political tribulations, if you will.
Brazil is lucky to be in a region that it dominates completely. The country
accounts for about half the territory, the GDP and the population of South
America. It has no outside enemies.
There has been a lot of talk about Brazil's mining and agricultural exports.
Brazil is not a major trade player. It is a major player in trade negotiations,
but it exports and imports relatively little. In contrast to China, its growth
does not depend on export markets. We are talking about a growth that is mainly
Finally, Brazil has an exceptional diplomatic capability. Brazil's diplomatic
service has long been on par with that of Canada or certain European countries.
What are Brazil's priorities? First, there is the matter of regional
stability, as much in the relations between countries of the region as within
the countries. We could be talking about potential political crises in Bolivia,
Columbia or Venezuela. Regional stability is sought strictly in terms of the
actual region. One of Brazil's priorities is to avoid the involvement of
non-regional players in this region, especially the United States, but also the
Organization of American States and the UN.
Brazil is doing its utmost to manage the prevailing regional instability on
its own. The crucial dimension of its foreign policy is gaining prestige and
influence in the global arena.
A new government was elected a few weeks ago. Dilma Rousseff, Brazil's first
female president, will take office on January 1. Generally speaking, her
election should not signal a shift in Brazil's foreign or domestic policy. I
would be happy to discuss this more in depth later on.
Where does Canada fit? Generally speaking, I think that Canada should view
Brazil's rise in power as an asset to our economic, strategic and political
interests, and to the values we promote globally. This being said, Canada is not
a priority for Brazil. There is no reason for Brazil to be a priority for
Canada. There is very little interdependence, a little bit of trade, some
interest, but not enough to justify a very deep relationship.
The main issue in terms of hemispheric policy is that Canada is an important
player in the Organization of American States. This body plays an important role
in Canada's foreign policy, while Brazil has systematically been trying to limit
the effectiveness and, more importantly, the scope of the organization,
especially when it comes to South America.
I feel that three minor issues could result in disagreement, but things
should not be blown out of proportion. The first issue regards the G20. For
Canada, the G20 is very important, since it is the only remaining international
body on which we wield significant influence. For Brazil, the group is too
large. It is more interested in getting a seat on the UN Security Council and
being involved in multilateral negotiations with groups of three or four, most
likely China, the United States and India. From this point of view, Canadian and
Brazilian interests are diverging.
Second, nuclear issues are key for Brazil. Brazil has signed the
Non-Proliferation Treaty, but it has been criticizing it heavily, especially
since it believes that the treaty somewhat weakens its attempts to get a seat on
the UN Security Council. In other words, the UN's five permanent members are
nuclear powers, and Brazil has committed to not developing nuclear weapons.
Consequently, Brazil's policy toward Iran is tainted.
Third — and I will keep it short — Canadian companies are major competitors
in the areas of natural resources, energy and financial services, especially in
the Andean countries that are very open to Canadian and American investments.
Brazil's financial institutions and large multinationals also have a strong
interest in those countries.
That being said, I do not believe that Brazil is a threat. On the contrary, I
believe that Brazil's rise in power is very good for Canada and the pursuit of
our general foreign policy objectives.
Senator Fortin-Duplessis: Welcome to our committee, Mr. Daudelin. We
have been eagerly awaiting your presentation. Here is my first question. Mr.
Daudelin, in March 2010, you wrote that Canada has no strategic interest
whatsoever in South America and the Caribbean. However, Brazil is one of the 13
priority markets identified as part of the Canadian government's global trade
In your opinion, to what extent has the Canadian government's global trade
strategy been favourable to the development of ties between Canada and Brazil?
Mr. Daudelin: Brazil is currently the world's sixth, seventh or eighth
economy, depending on how the ranking is determined. Consequently, it goes
without saying that an export-oriented country like Canada cannot just dismiss
such a market. This being said, you are familiar with markets and trade
relations figures. Brazil accounts for a very small portion of our exports and
imports. In addition, Brazil is more of a competitor on international markets.
Obviously, we are talking about an important market. There are products we
could export to Brazil. I think the Canadian government would be justified in
making an effort to promote Canadian exports. I do not think that the fate of
the Canadian economy is being decided by Brazil or the rest of South America.
That is why I said that there is no strategic interest for us there. There are
some interesting considerations that would justify an effort, but there is no
important strategic interest involved.
Senator Fortin-Duplessis: That is your opinion. I have an unrelated
question for you. The various media have been reporting that the Brazilian
police have been organizing attacks, over the last few days, in Rio de Janeiro's
slums, which are dominated by gangs. The confrontations brought on by the
attacks have resulted in several deaths. One of the possible reasons for the
recent rise in confrontations is retaliation against the establishing of police
pacification units. Police units began setting up at all strategic points almost
two years ago, in an attempt to rid the favelas of drug dealers and to bring
peace to the residents.
A large portion of the population believes that the police pacification units
help to control the problem, but others are wondering about where the criminals
are settling once they have been kicked out of a given area.
What is your take on these events? At first glance, it all seems to signal
the government's willingness to clean up and stop crime and drug dealers. The
situation is a bit peculiar because the government has been trying to establish
a police presence throughout the slums for two years, but, as if by coincidence,
the pacification units were finally set up right after the election of the new
president. What do you think about this?
Mr. Daudelin: First of all, violence in Brazil has been declining for
about ten years, especially in the southeastern part of the country. There are
areas where crime is spiking, but in the industrial and financial centre of
Brazil, in the states of São Paulo and Rio de Janeiro, we can say that homicide
rates are dropping and have been at 30 per cent, 40 per cent and 50 per cent
since the beginning of the 21st century.
The events currently taking place are part of a dynamic the government is
using to gain control of an area it has never controlled before, as urban
outskirts were never regularly patrolled by the Brazilian police. People living
there had been left to their own devices. It is a fact that the middle classes
living in the southern parts of Rio de Janeiro, São Paulo and most large
Brazilian cities represent an important drug market. Drug dealers set up right
next to these areas because the police left them alone there.
To answer your question, the situation is not a simple one, and I don't think
that the solution could be simple either. The police pacification units were
introduced very progressively, and we already know that drug dealers from
Complexo do Alemão, where the latest attacks took place, have by now moved to
other slums. However, the number of police- controlled shantytowns is growing.
Let us now talk about the link between the recent events and the election of
the new president. In Brazil, police units patrolling the streets and
maintaining law and order fall under provincial jurisdiction. The police
pacification units are an initiative of the Rio de Janeiro state governor, who
introduced the units a few years ago, a move that helped him get re- elected
last month. However, this is completely unrelated to the election of the new
The federal government supports the initiative introduced by the Rio de
Janeiro state government. In addition, the new president has announced that she
would like the units to remain in the slums, possibly until 2014, when the FIFA
World Cup will be held in Brazil.
Senator Segal: I want to welcome our witness. I am glad to learn that
people speak French at the Norman Paterson School of International Affairs. I
have two or three questions about the major improvements Brazil has made in
terms of poverty-related issues you talked about in your presentation.
There has been a lot of talk about the Bolsa Familia program. Could you tell
us what part this or other programs have played in reducing the level of poverty
in the population?
Mr. Daudelin: Bolsa Familia is a program that development policy
experts refer to as a conditional cash transfer. Under the program, the poorest
families are eligible to receive a government transfer if they commit to sending
their children to school and to visiting clinics on a regular basis.
The amount they receive is not necessarily high. Currently, it is set at BRL
200, which is about $150 a month. However, in the poorest communities, this
amount is very important because it has helped very poor families to rise above
the poverty line.
The program is expanding rapidly. In addition, it is one of the main reasons
for President Lula's popularity and Ms. Rousseff's election because Lula merged
various cash transfer programs that existed under Fernando Henrique Cardoso and
expanded on them greatly.
Currently, we are talking about something a little below 3 per cent of the
GDP, which is quite significant. This being said, the program is not the only
reason why poverty rates and inequality are declining in Brazil, as other
measures have also been taken. For instance, the minimum wage has increased
dramatically in real terms, and that affects people who do not necessarily
receive cash transfers.
It should be noted that, while fund transfers are very important in the
poorest rural areas, they are much less so in the cities, where $160 is less
than what a family can get by sending one of its children to work.
However, under the Fernando Henrique Cardoso regime, almost universal
education rates had been reached in the cities. It was not causing actual
problems, but poor workers remained left out. Certain measures have been
adopted, such as the pension reform, but also, more importantly, the minimum
In addition, there is something of a mystery that is hard to understand in
Brazil's case. The fallout from the liberalization process in the1990s seems to
have resulted in a drop in performance or education. In other words, in the
past, going to school — especially university — allowed people to increase their
earnings tremendously. However, events that transpired in the 1990s and are
still not completely understood seem to have played an important role in
decreasing the importance of education.
Currently, working and living conditions of unskilled workers are improving
more quickly than those of skilled and educated workers. There has also been a
shift in inequality. Bolsa Familia and other programs are somewhat more
structural initiatives that we are still having trouble understanding.
Senator Segal: Do you think that the fact that Brazil is not
necessarily interested in becoming an American ally, like Canada, will result in
problems or conflicts in terms of the positions Canada holds on democracy and
the progress of trade liberalization as far as South America is concerned? The
fact is that our Brazilians friends are adopting initiatives to align themselves
with countries that are not Canadian allies, such as Cuba and Argentina. Do you
think this will cause problems, or is it something that can be sorted out
between Canada and Brazil?
Mr. Daudelin: I do not think that Canada can influence in any way
Brazil's relationship with South America. I do not think that Brazil's attitude
will cause problems for Canada in that sense.
The biggest threat is not Cuba, which is a small, derelict island, with
growing political problems and very serious economic woes. Currently, the real
source of instability is Venezuela, which is a problem for the U.S. and for its
South American neighbours. The U.S. happens to have very few tools for
influencing Venezuela, while Brazil is better equipped to do that. Brazil,
especially under Lula's rule, had substantial leftist legitimacy that enabled it
to keep Venezuela in check. From that point of view, on the contrary, I think
that Brazil is a stabilizing factor, even when it comes to regimes like those in
Venezuela and Cuba, to a lesser extent.
That being said, there is something important I should point out. Brazil has
been setting itself apart for a while through its somewhat dubious positions on
human rights at the UN. Recently, Brazil refused to condemn Iran, Sudan and so
on. In a way, this contributes to the country's attempts to set itself apart in
order to get an invitation to help deal with Iran. Brazil wants to be involved
in the discussions with Iran, and the fact that it was initially kept out of
those discussions was perceived as a snub in Brasilia.
Despite that, the new president has stated that she does not necessarily
agree with Brazil's recently adopted positions at the UN. There could possibly
be a slight shift in terms of the country's positions on human rights.
Basically, I believe that, when it comes to major issues like regional
stability, protecting economic interests and protecting property rights in the
region, Brazilian companies are just as interested in reaching those goals as
Canadian companies are.
Senator Segal: People have told us that the regulations for Canadian
companies that want to invest in Brazil are more complex than Canadian
regulations are. For instance, Val Inco, a major investor, had no problem with
Canadian regulations. Do you think this will always be the case? Could Brazil
relax its regulations, so that Canadian companies can invest more there? Or do
you believe that Brazilian regulations are fairly standard and are in line with
a position that is completely justified for a country like Brazil?
Mr. Daudelin: First, we should discuss whether Brazil's attitude is a
protectionist one. Are they selective in terms of foreign investments? Have they
facilitated foreign investments? I think it is clear that is not the case.
Brazil's system is not closed to foreign investors, but we are talking about a
country where it is difficult to invest. I have heard the MIN people say that
investing there is incredibly complicated, but worth the effort. Is this likely
to change? I do not think so.
Regardless of its economic validity, Brazil's policy is incredibly
legitimate. People agree on that. For instance, imagine if a large Brazilian
company started buying airplanes like Air Canada buys Embraer jets. It is hard
to believe that no one would speak out if a Brazilian company was buying
Bombardier planes with Embraer being so close. Politically, their approach works
very well and is sustainable.
Regardless of what we think from an economic theory standpoint, Brazil is
growing at 4 per cent, 5 per cent, 6 per cent, even with its restrictions on
foreign capital. Brazil is a major destination for foreign capital. Among the
obstacles involved in investing in Brazil is what they call a "Brazil cost,''
which stems from the regulatory process. There is a tremendous amount of work to
be done, but I do not see this as a very serious obstacle. Consequently, there
is no pressure to change things.
Senator Jaffer: Welcome, Mr. Daudelin. I found your presentation very
interesting. President Lula had an influential role in Brazil and outside its
borders. He was much respected. What happens now?
Mr. Daudelin: That is a huge question. There is no doubt that Dilma
Rousseff does not have, in any meaningful way, any degree of international
legitimacy. Also, her personal history is not as appealing globally. She was a
guerrilla student, we learn, as her file comes out.
Some may find this appealing, but it is not the rags-to-power story that was
behind Mr. Lula. As well, Mr. Lula has proven to be an extremely effective
player globally, using that legitimacy in a way that was unassailable. Who else
could go to the World Economic Forum at Davos and say that the crisis was caused
by a bunch of blond, blue-eyed bankers? He was sitting in Davos and everybody
simply said, yes, okay. Nobody said anything. What he said was accepted.
Where it is most significant is regionally. Mr. Lula was able to organize a
meeting and dismantle regional tensions in a way that Dilma Rousseff is unlikely
to do. Mr. Lula was able to ease the tensions between Venezuela and Colombia and
Venezuela and Ecuador. He would organize a meeting, at the end of which
everybody would grumble a bit and agree to stop the confrontation. Especially in
the management of Mr. Chávez, the change will be significant.
In terms of Brazil's prestige, it is difficult for me to see how Dilma
Rousseff could better Mr. Lula. It is possible that Brazil's presence will be in
the form of its diplomats in the coming years. I cannot see the President of the
United States coming to Dilma Rousseff as he came to Mr. Lula and say, he is my
man. This will not happen. The kind of easy populist appeal that Mr. Lula could
command is unlikely to be found again. As a result, Brazil's image and
international presence may suffer a bit. That being said, as I was trying to
explain in my opening presentation, the foundations of Brazil's rise to power
are so sound that it will not be significant.
Senator Jaffer: A world leader has been lost when it comes to
negotiations. There will not be another President Lula.
Mr. Daudelin: Exactly.
Senator Jaffer: I was interested in what you said about the
Organization of American States and how Brazil wants to limit its power. With
the change in leadership, what will happen?
Mr. Daudelin: The OAS is not set up in a way that is favourable to
Brazil. It is an extremely decentralized organization where the majority of
votes are in the hands of small countries, most of whom are in the Caribbean and
Central America and are dependent on trade, migration, remittances, investments
and aid from the United States and Canada.
If you play that game from the standpoint of Brazil, you almost always lose.
Brazil has tried systematically to build up alternative institutions, especially
in South America where they have the Union of South American Nations, UNASUR,
and now they have this Community of Latin America and Caribbean States that
excludes the U.S. but this one is a bit too big for them. They like small
organizations that are poorly institutionalized where their first-rate diplomats
can basically, not necessarily, control the process and wield an overwhelming
influence. From that standpoint, the OAS does not register.
This goes for Mexico and most large countries in the Americas. I have never
liked the OAS, really, for historical reasons. I assume that you have been to
Washington. The OAS is literally in the shade of the White House, which is
symbolical. It has a problematic history, and it is not seen as a significant
player except by some countries. Chile is one of them, Central America and the
Caribbean countries as well as Canada.
There is potential for Canada to play the OAS, but it is not the kind of
place where Canada will find much support from Brazil. However, there is a
meeting in Brazil to talk about social policy, organized by the OAS. They will
go through the moves, but if the OAS were to collapse tomorrow there would be a
discreet party in Brasilia or, at best, no one would notice or mention it.
Senator Di Nino: Welcome. I want to continue where Senator Segal
commenced about the trade and investment environment in Brazil.
There was a recent description of the relations between Canada and Brazil in
those areas using words like, "neglect,'' "misunderstanding,'' "recurrent
trade'' and "political irritants.'' Would you agree that has been the case
Mr. Daudelin: It is true. There was a period in the 1990s where
everything was going badly. There was the fight between the two big companies,
Bombardier, which, as you know, is a significant political player in this
country, and Embraer, which is worse. It is a creation of the Brazilian
military. It was built as proof that Brazil could play in the big leagues
technologically. The symbolic investment in Embraer was even more important than
Then there were these Canadians who were caught kidnapping a supermarket
owner in São Paulo. It was just piling up.
I think there has been an effort on both sides to calm things down. It has
been effective. The political irritants you mentioned have mostly disappeared.
The other thing that has been happening is that Brazil's multinationals have
become global. Embraer is thinking of building military transport planes, and I
was reading that one of the suppliers would be a company based at Mirabel. They
have global value chains and they buy what they need everywhere. Canadian
companies in some areas are globally competitive.
There is a degree of interdependence that has come into play and effective
diplomacy to calm things down. The other issue I forgot to mention was the mad
cow affair, which was poorly managed on our side, exploited for nationalist
purposes on their side and blown into something that had no sense from the
standpoint of two large, serious countries. These issues are largely out of the
The disagreements that we are likely to have will have to do with Brazil's
growing assertiveness globally in the face of Canada's attempt to keep a role
and influence in some institutions. What I mentioned about the OAS, the OAS is a
key tenet of Canada's policies in the Americas. Brazil does not like the OAS.
The G20 is a central tenet of our foreign policy. The G20 is a compromise for
Brazil. For Canada, it is the best we can get; for them it is a compromise, and
In global multilateral talks on trade, the quad used to be the United States,
the European Union, Japan and Canada. The last quad was the U.S., the EU, India
and Brazil, and Canada is out. All these things are the relative marginalization
of our country, and Brazil's growing power and influence can create real
disagreements that will have to be managed. I think our people are aware of this
at "Fort Pearson,'' and they have been managing it well in recent years.
Senator Di Nino: Regarding foreign ownership, due process and a fair,
level playing field, does that exist for investors and those who wish to trade
with Brazil, or are there impediments?
Mr. Daudelin: As a rule, it may be difficult to find. It probably
varies from field to field, but it is probably better to find a field where a
large Brazilian company is absent. This concerns the legitimacy of industrial
policy, something that we no longer talk about in this country. There, however,
people talk about this all the time.
When they have all those private companies and look at the ownership
structure, we discover that almost invariably the government has a golden share,
and much of the equity is in the hands of pension funds. What are those pension
funds? They are the pension funds of the employees of the Bank of Brazil, the
pension funds of this, that, and so on. These pension funds are not run like the
Ontario Teachers Pension Plan, they are run like La Caisse de dépôt et placement
du Québec. Also, they are managed by the government. It is the caisse model, or
maybe the caisse is the Brazilian model unknowingly.
Senator Segal: It is the French model.
Mr. Daudelin: These funds played a central role in the privatization
process that took place in the 1990s. It was privatization by half. On top of
that, they have massive government investment. They have Brazil's National Bank
for Economic and Social Development, BNDES. It is a larger player in South
America than the World Bank and the Inter- American Development Bank. They have
billions of dollars that they use for development projects, and the SNC-
Lavalins of Brazil, there is a series of them, they get the contracts.
For dam building, they have state companies on both sides. The latest
project, Belo Monte, is a huge dam that they are building in the Amazon right
now. The two consortia that were competing included, on both sides, large state
companies and large engineering companies, most of whose major projects are
funded by the government. It is within the state's purview. The industrial
policy is central and it will not change. The consequence is that it makes for a
tricky field in which to step.
Research in Motion is becoming involved in Brazil, so they made their sums.
It is a huge, fast-growing market. It may be worth it now, but it is not easy.
Senator Di Nino: The role that the Canadian government plays in all of
this, is it adequate, from your standpoint? Has it improved? Is it becoming
Mr. Daudelin: I do not know enough about that role. I would ask people
from the private sector.
The people I have seen working on Brazil, our current ambassador and the
previous one, some of their staff is first rate. They know Brazil well, which is
unusual because Brazil is not the kind of country that many people know much
about. They understand the game.
How good they are at helping Canadian corporations manoeuvre, I cannot
Senator Di Nino: Thank you. Perhaps I can have an opportunity on the
Senator Mahovlich: Your views on Brazil's plans to develop submarine
capabilities and the potential implication for the country's non-nuclear status,
can you extrapolate a bit on that area for me?
Mr. Daudelin: Brazil announced a few days ago that they are launching
a large submarine-building program, including six nuclear-powered submarines
whose technology is imported from France.
Senator Mahovlich: From France?
Mr. Daudelin: Yes, it is French technology. There will be 20
submarines; 6 from France and 14 non-nuclear, some of which will be refurbished.
That is what was announced. The program extends to 2043, and this touches on
Senator Di Nino's question.
There are two sides to this question. One concerns Brazil's attempt to
challenge the current global nuclear proliferation regime. Brazil has signed the
agreement but is uncomfortable because they feel it constrains their ability to
claim a permanent seat at the United Nations Security Council. As I said, the
permanent five is a nuclear club. Therefore, Brazil is a bit awkward with this
situation. They know they have the nuclear technology, and they are unhappy
about the situation.
That is why the P5-plus-1, the six countries that were chosen to negotiate
with Brazil, when it was announced that Germany was added to the permanent five
but nobody else, especially not Brazil, it was seen as a slight for Brazil. They
felt they should be there because they are sacrificing a lot by not having
nuclear weapons. At least, they wanted them to admit it was not a pre-condition
for Brazil not being involved with the governance of the Nuclear
Non-Proliferation Treaty, NPT.
Second, Brazil is unhappy with what they perceive to be the lack of
commitment of the nuclear powers to disarmament. As you know, the NPT is a deal.
The nuclear powers were committed to disarm and the non-nuclear powers, in
exchange, committed not to arm themselves. There is a feeling in Brazil — there
was a feeling in India and they acted on it — that part of the deal,
disarmament, was not complied with. There is a certain frustration there. That
is one part of the issue.
They are also questioning the International Atomic Energy Agency, IAEA, and
its ability to inspect. They are always making a bit of a fuss. In substance, I
do not think the Brazilians are developing a nuclear program or will do so. The
reason they want to do so has nothing to do with security or strategic
interests; it is strictly related to global status. I think that is why they
make a fuss around it.
The other dimension of the submarines is that part of the rationale is a
military rationale. Brazil's oil and gas reserves are offshore. Hugo Chávez is
buying his own submarines and that bothers Brazilians.
What Brazil is buying in those submarines is technology. The first submarine
will cost them two fortunes, but then the technology will be theirs to build the
others. Those are the kind of deals they are negotiating regarding war craft
right now. They are willing to buy an aircraft, the French Rafale, which is not
as good as the aircraft Hugo Chávez has in Venezuela. They do not care because
they want the technology and the ability to produce them on their own. It is
military procurement as industrial policy.
In the case of the submarines, it is the same thing. It is extremely high
technology that they will control. They want to do the same thing with the
aircraft. They want to be a country in the world that has nuclear submarines
without going as far as reneging on their commitment to the non-proliferation
treaty, which would be poorly received in South America and would create
problems for Brazil.
Senator Mahovlich: Might I have another question?
The Chair: Yes.
Senator Mahovlich: You mentioned that many people do not know a lot
about Brazil, and I agree with you. I had a question the other day for some
witnesses, and they were unable to answer it. Maybe you can.
Mr. Daudelin: Maybe.
Senator Mahovlich: Concerning immigration to Brazil, where do the
people come from? Do they come from China?
Mr. Daudelin: Immigration is not significant. There is not much
immigration into Brazil right now.
Senator Mahovlich: Not like Canada?
Mr. Daudelin: No: There is no active immigration policy in Brazil.
They are not seeking immigrants. There is no such strategy.
Senator Mahovlich: What if the boat people pull up?
Mr. Daudelin: Geographically, they have been insulated from them.
There is some immigration from Bolivia and Paraguay, from neighbouring countries
in part because Brazil is growing so fast, but it is not significant. The big
immigration movement was at the turn of the century from Japan, Italy, Portugal
and Germany. If you go to São Paulo, you can find fantastic sushi and great
Italian food. However, that stopped when Brazil went through its economic
People may decide to go to Brazil now, but it is not on the policy map, it is
not on the political map and it is not significant in demographic terms. What is
more, they are not confronting the kind of problems that Canada is confronting.
Educating their own people will provide everything they need for technical and
Senator Downe: Following up on that point, what has happened to
military spending in Brazil over the last number of years? Is it increasing
dramatically like China, or is it on an even keel?
Mr. Daudelin: It has been increasing. Again, I do not have the numbers
on hand. They have announced significant programs. The submarines are one and
the war craft is another one. There is a new military transport plane as well.
It is part of what I described as an industrial policy.
Right now, with respect to the Brazilian military, it is one of the
weaknesses of the country from the standpoint of its claim to global status; its
military is not that impressive, especially when we look at its level of
equipment. Given that they are surrounded by neighbours who are arming quickly,
it has encouraged them to invest. They are not, however, the driver of whatever
arms race is taking place in Latin America. They are more playing catch-up, and
they play catch-up less with a preoccupation to catch up than with a
preoccupation to obtain the technology, become an exporter of aircraft and
submarines and be self-sufficient.
Senator Downe: That is where they part company with their South
American neighbours who are buying everything but not producing anything. As you
explain it, Brazil wants to grow their industry and be a producer?
Mr. Daudelin: Yes: If Embraer were Boeing, half of its budget would
come from military contracts that are not submitted to the rules of the World
Trade Organization. That is a big advantage. Also, they need engineers and it
represents good jobs. That is the main preoccupation. That is why they are not
being aggressive in terms of what they are buying.
For instance, one of the planes being considered was the Saab Gripen war
craft. By global standards, that plane is not leading edge, especially compared
to what Venezuela is buying, but they do not care. They want the technology and
the ability to produce it, and they are willing to pay more for the French
Rafale than they would pay the Americans. Why: Because the Saab has an engine
that is produced in the United States, which means that the U.S. Congress could
block the sale of the technology, which is a technology they want. Therefore,
they are willing to pay much more for a plane from France that is not leading
edge, with a guarantee that they will have the technology.
Senator Downe: I understand the argument on the procurement and
industrial policy, but I am unclear how the military spending fits in with the
priority you identified of regional stability. Do they intend to grow their
military after they acquire all of this technology or do they intend to export?
Mr. Daudelin: No: The way in which they have managed the region has
never involved the use of the military, except in centuries past. The outlook of
Brazil has never been to use its troops for offensive purposes in the region.
That purpose is absent. Their strategy, which has been focused on Argentina
since the post-war era, is now focused on the Amazon. The idea to wage a war in
South America against their neighbour is far-fetched. There is no aggressive
component to that policy by any means. I have never seen any indication of that
Senator Downe: My last question is on corruption. We have heard from a
number of countries about high levels of corruption. What is your view of
corruption levels, if at all, in Brazil?
Mr. Daudelin: Corruption levels are quite high in Brazil. The chief of
staff of Dilma Rousseff, when she was head of political affairs, and she was the
right-hand person of the president before, her chief of staff has been accused
and lots of proof is emerging that she has been hiring lots of her relatives and
contracts, et cetera. It is not only that. The likely president of the Senate,
the former president José Sarney, has been proven to be extremely corrupt and to
have diverted funds and so on. He is protected because he is influential in the
One thing that is significant is the way in which the Brazilian Congress
works. It is a bit like the U.S. but try to imagine the U.S. Congress with 20
parties. When you are talking about pork, for example, you need a pork farm.
That is what they do. There is something that involves what they call political
articulation, which means giving some ministries to parties, giving some
contracts to some companies related to one minister, and so on. Right now, if
you read the Brazilian press the whole discussion is around who gets what
ministry, and the ministries being sought do not include not the Ministry of
Foreign Affairs. They are the ministries of transportation, Brazil Post,
communications and so on, and everyone knows what is involved.
Let me be clear. I think they have been extremely effective in spite of all
this because the U.S. Congress is paralyzed with two parties and one faction in
each one of them. In Brazil, they have managed to govern that extremely complex
country by using all the means available. I do not think that it is as
problematic as it appears at face value. I will only say that.
Senator Downe: Is there much media coverage of the corruption and
public pressure on the government to introduce reforms?
Mr. Daudelin: The Brazilian press is fantastic. The coverage is
detailed. The level of detail and the level of analysis in Brazilian papers puts
ours to shame. Even the coverage of international affairs, I am always amazed at
that. When I have my press review every day, I read my Brazilian papers, and
their coverage of international affairs has no comparison in our country. It is
fantastic. They are keen. The large newspapers, of which there are three, and I
am thinking especially of the two São Paulo ones, will dig up anything and
When I say that José Sarney, the former president, has clearly been shown to
have been involved in corruption, this was all in the newspapers. There was
tremendous pressure and President Lula had to save him; otherwise his party
would not have supported Dilma Rousseff and he might have lost the election, so
he saved him. It was clearly described and analyzed in the newspaper.
I wrote a piece a while back called, "The good news scandal.'' I wanted to
emphasize that all these things come out. There is a degree of public control,
although its impact is limited.
The Chair: Following up on that point, there is less coverage,
understanding and more control at the state level and that control filters in.
Can you comment on that? It seems to me if one is in the state of Rio de
Janeiro, it is different from being in the Brazilian government.
Mr. Daudelin: That is a good point. The central government is well
covered but Brazil has 27 states, some of which are countries on their own. The
state of São Paulo is probably among the top 25 economies in the world. Some
states are poorer and in some states the corruption levels are much higher.
One thing I forgot to mention is that the judicial system is also effective
in dealing with this corruption. People are arrested, including governors,
candidates, and so on. It does not always lead to where it should. Brazilians
say it ends up in a pizza, which means with everything on the plate and nothing
really happens. However, it is public and people know it.
At the state level, yes, it is a bit trickier, although, again, in São Paulo,
the coverage is excellent. Also, it is the same in Rio. However, when one moves
out a bit, things can become problematic, with regional newspapers that are
owned by big families that also control the governor's mansions. Brazil is a
country of countries.
Senator Robichaud: Are there any movements in Brazil aimed at
mobilizing the population, or the people who benefit less from the country's
natural resources, in order to encourage them to claim their share of the
Mr. Daudelin: Yes. There are some fairly powerful unions. In addition,
President Lula's political trajectory is primarily based on steelworkers' unions
from São Paulo's industrial suburbs, but those unions are mainly concentrated in
the public sector and the major automobile, high-tech, airplane and other
related industries. Things are less organized in the rest of the country's
That being said, there is a very well-known movement, the Landless Workers'
Movement, MST, which mobilizes people in favour of land reform, and whose
positions are very radical. The movement organizes occasionally violent protests
where people occupy lands in order to force the government to deal with
Land distribution is still an issue in Brazil. Poverty in rural suburbs is
still staggering, so the movement is relevant. However, it is clear that this is
a very radical movement, which has ties to Dilma Rousseff's and President Lula's
Workers' Party, and which the government sympathizes with, but which does not
have much influence on the government.
Its influence on politics in general is rather marginal. There is also a very
small movement, the Homeless Workers' Movement, which is trying to mimic the
MST's actions, but in the cities. The movement fights for access to housing and
similar issues, but its work is not very significant.
Senator Robichaud: Could those movements come to the fore and gain
more power, or are they limited?
Mr. Daudelin: These movements have been somewhat repressed, but the
main result of their work is a significant improvement in the living conditions
of Brazil's poor classes over the last 10 years, which means that the actual
basis of the mobilization movement is crumbling. So, I do not think so. If we
want to talk about relative destabilization factors, but without exaggerating,
we could talk about drug networks, which have a more considerable effect. A few
years ago, these networks brought activities in São Paulo to a halt for almost a
week, and they caused very serious problems in Rio. Their effect is more
significant, but once again, considering how Brazilian social policy is managed
generally, the government is more than capable of handling all the tensions.
Senator Robichaud: Regarding corruption, you say that people more or
less accept that this is the way things are done. Do you believe that it will
continue this way?
Mr. Daudelin: No, there is much resistance to corruption. However,
people seem to accept this reality. There is increasing pressure, especially in
some southeastern states, to minimize these problems. The cases I brought up are
mostly found in the suburbs, either in the north or the northeast of the
country, where politics are more traditional and where people resort to
protectionism or patronage. These cases can also be found in other states. São
Paulo, for its part, cannot afford to function in this way. There is very little
corruption, so some progress can be noted. The Brazilian law society has a lot
of influence in this matter, and the media are being rather helpful too. So,
while it is not legally condoned, corruption is an accepted practice that the
country is not fighting as much as it could.
Senator Robichaud: It is nonetheless tolerated.
Mr. Daudelin: Yes, in the sense that the options for getting rid of it
have not been looked into.
Senator Stratton: I want to talk about drugs. As you know, Mexico is
undergoing a big battle with the drug warlords, especially along the
Texas-Mexico border. They have viewed it as a serious problem to the degree that
the candidates lining up for the next election, because President Calderón
cannot run again, are all behind continuing this war. If they do not, they feel
they will slip back into a narco-state, which would be serious.
Given what is happening in Mexico, where are the drug lords in Brazilian
society? One always fears that it is a strong society. To what extent do they
influence corruption in government? What is the government doing? In the short
term they are going after it for the gains, but one worries that in the long
term there might be an ongoing battle to rid the country of that problem?
Mr. Daudelin: First, if I may, I want to discuss the premise. I am not
sure that the Mexican situation is as bad as it is painted in the media here or
in the United States. Even in terms of violence, Mexico is less violent today
than it was 10 years ago.
However, what matters in Mexico is that they are located beside the largest
drug market in the world. The rent at stake is absolutely huge. That kind of
rent is not present in Brazil. There is a drug market and one can buy cocaine or
anything one wants in the large cities of Brazil, and marijuana in rural areas.
It is similar to Canada.
I have never seen indications of large-scale drug cartels in Brazil. Lots of
drugs come in, some from Europe. There are connections with Nigerian cartels for
exports from Colombia and so forth. The distribution is low-level, in particular
in richer states with the wealthiest cites where the markets for drugs are more
The websites of Brazilian newspapers and TV stations display photographs of
the houses of the drug barons of Rio de Janeiro; they are rather pathetic. Their
mansions are in the shanty towns. They build the walls on which they paint the
Corcovado and famous landscapes of Brazil so that they look nice. They have
small pools with their names on the bottom, and they have a few guns and so on.
There is nothing like what we have seen in Colombia and Mexico for the simple
reason that the drug market is local, whereas in Mexico and Colombia it is all
linked to the U.S. market, hence the opportunity to build huge organizations.
Are drugs a problem in Brazil? Yes, but precisely because the gangs do not
have access to a large pot of drug rent. As far as I know, their influence on
politics is marginal. They do not have the kind of situation like they had under
Carlos Salinas; it does not register. There is much more money in other things.
Senator Stratton: It is interesting because if they have done battle
with drugs and the drug lords in Colombia, the battle has moved north. I thought
it might have impacted Brazil in the same way, although not to the same degree,
as it has in Mexico.
Mr. Daudelin: Brazil is not in the right location.
Senator Stratton: I appreciate that.
Mr. Daudelin: If you want to send drugs from Colombia to the U.S. and
you go through Brazil, you are looking for trouble.
The Chair: I will put a few questions.
Can you comment on the middle class? Brazil is even more disproportionate of
poor with a small layer of extremely wealthy families, including the 13 families
that moved from Portugal 200 years ago. The dynamics in Brazil have taken off
because there is more than moving up only from abject poverty but a real middle
class has been created. São Paulo is the centre of much of the business that has
come from that change.
Mr. Daudelin: Yes, the middle class is expanding quickly throughout
the country. It is interesting that there is an explosion of universities, not
all of which are great. There are hundreds of universities. People whose parents
did not even finish high school are going to university. It is the standard
thing to do.
A friend of mine and somebody that you might want to talk to, Ted Hewitt,
Vice-President, Research and International Relations, of the University of
Western Ontario, has been studying the shanty towns of São Paulo for 30 years.
He said that life has changed so much. I was talking to people who had problems
making ends meet. Now, they are putting money aside to pay for the university
education of their kids. That is how much it has changed. I will not defend this
kind of public policy because my reading of this explosion of universities is
not positive. People are more educated than ever before. A recent biography of
Mr. Lula mentions that he took a professional program for a year to learn how to
be a machinist. The program had been set up by someone long before. He said that
when he received his diploma, his mother was as happy as he was when he sent his
kids to university. He was a kid who did not go to high school.
It is not the exception. There is a huge expansion, especially from the
bottom. Brazil has always had a large middle class, and that is why they have
high-quality newspapers and a rich elite culture. Now, a lower middle class is
expanding from the bottom, more quickly than ever in the history of the country;
and not only in São Paulo.
The Chair: I want to explore that expansion, because strategically
that has been underpinned by many government policies, some of which are not
sustainable. The government raises expectations, and then if the next
generation, or people in 10 years, cannot go to the universities, cannot obtain
the diplomas, they will have pent-up frustration.
My question, in light of the time, is, you say that strategically we do not
have much, Canada and Brazil, in a trading opportunity or in a political
opportunity. We are interested in OAS. They are less interested.
However, Canada has always reinvented itself; the honest broker or something
else. Strategically, the shifts, multilaterally and strategically, in this
hemisphere are changing. There are a lot of new players and avenues. Surely it
will depend on the creativity of developing a new relationship with Brazil that
takes into account where they want to go internationally and where we want to go
I see Europe being part of that shift because Europe now strategically is
becoming a bloc, under the Lisbon Treaty, becoming closer and more powerful that
way, which is positioning us differently in the multilateral shift, and Brazil
is noting that. It was always through somewhere, Spain or something, that they
made their comments.
They are looking for space. We are looking for new opportunities. You simply
say that the existing mechanisms will not create much for us. However, is there
room to create a new relationship strategically with Brazil?
Mr. Daudelin: I will start with your first point. To be honest, of the
main tenets of Brazilian economic and social policy, I see none that are not
sustainable. Much of the expansion of the universities is private universities.
Poor families spend a fortune for what I would call poor-quality university for
now. The public universities are good in Brazil and hard to get into. They have
financial problems, but the country is generating lots of resources, so I am not
sure about that. I think it is sustainable. The foundation, as I said, is
What can that mean for Canada? On the issue of creativity, I have been
following Canada's policy towards Latin America for a while now, and we have
been creative. In 1989, we had a new strategy for the Americas that involved our
joining the OAS. After that, we entered aggressively into the hemispheric trade
integration model. We pushed for it strongly, and it did not work well. That is,
at the OAS we remain influential, but the organization is marginal.
For the rest, it is not significant. I think the big problem with our
creative foreign policy is that much of it was not based on strong interests. I
am not saying it is a bad idea to have a disinterested policy. I am saying that
when the policy is not based on strong interest, they can change their mind from
one day to the next and nothing happens. They are not disciplined by their
interests, and that has been the problem.
If you are asking me where the opportunities are in Latin America for Canada,
I would say they are not in Brazil. They are in Andean countries: Colombia, Peru
and Chile. They are big mining countries, countries with a financial sector that
is under-developed, by our standards. There is strong interest among Canadian
corporations in those sectors to become involved.
However, Brazil is not in the same situation. It is extremely difficult for
me to think creatively about joint initiatives based on strong interests,
precisely because there is little interdependence between the two countries.
Lastly, regarding your point about Europe, Brazil's huge advantage in recent
years has been that its development and growth is based essentially on the
development of its domestic market. The fact that the poor are integrated in the
consumption is the big driver of their growth, and this integration insulates
them from the crises that we are seeing in Europe that will have reverberations
in North America.
For instance, Brazil's trade policy is anaemic. They have not signed a
serious trade agreement since the Southern Common Market, MERCOSUR, with their
neighbours, which they did not really need. They are not pushing aggressively
with Europe, although they have been talking with them forever. They are talking
with India, with whom they do not trade. They are talking with South Africa,
with whom they do not trade. They go to the meetings of the BRIC countries —
Brazil, Russia, India and China — with whom they do not trade. China is
perceived as a threat to the industrial sector, but they will protect it. It is
In contrast, Canada is involved totally in the world. We need those trade
agreements. We need to develop markets. From that standpoint, it is hard for me
to see a common agenda emerging.
I am in favour of good relations with Brazil. It is my business. However, I
do not see strong foundations for a stable and serious policy towards the
The Chair: You have pointed out the economic side, but we also have
foreign policy interests that are strategically in political spheres. The world
is changing dynamically, and how we can influence the multilateral systems, the
United Nations, the blocs. We used to be close with our like-minded, and that
would be Northern Europe. Now, of course, Europe is more inward looking, and
Brazil is searching out a role for itself. That is the point I am looking at.
Politically, is there room to look at their interests and our interests, and
either create new institutions or work differently in the existing institutions,
G20 being one recent development?
Mr. Daudelin: I think global governance is, in part, kind of a
zero-sum game. The influence that is gained by one is likely to be lost by
somebody else. I think you are right. The global governance is in flux, but that
flux means that Brazil is moving ever closer to the centre, and we are moving
ever closer to the periphery. This is a fact that we need to deal with. We need
to deal with relative marginalization.
In that process, for that purpose, I am not sure that Brazil is a reliable
ally because the gains they make, Canada pays for. As I said, the G20 is too big
for Brazil and it is just right for Canada.
At the UN it is the same thing. They want a permanent seat at the UN Security
Council. You will remember that in the case of Brazil, they have been at the
Security Council half of the time. They missed one mandate. They are re- elected
every second election. They have done that for 20 years now.
Japan is the country that is present most regularly at the UN Security
Council. They are not happy with this situation. They want a permanent seat. In
that sense, it is difficult for me to see some kind of substantive agenda
between the two countries except on specific issues, perhaps.
Even with the environment, Brazil can play hardball because they have an
energy matrix that is unmatched in the world. They have hydroelectricity, gas,
oil, alcohol, and now nuclear power. Soon they will join the Organization of the
Petroleum Exporting Countries, OPEC, as an exporter of oil. They find stuff
every day. Canada is not in that position. Canada is caught in a dirty energy
trap, and they are not.
They go to Copenhagen. Who do they want around the table: Canada? No: Brazil.
This is exactly what happened in Copenhagen the last time.
The Chair: I am not sure I want to end on that note.
Senator Robichaud: Any other questions?
The Chair: We have been looking at the BRIC countries Russia, India
and China so it is natural to look at Brazil too. I think part of our assessment
will be whether there are new opportunities and whether we are overlooking
anything in Brazil. Are we focusing more on India and China, and is it more
legitimate for Canada to do so because we did find opportunities in India, and
certainly China and Russia? You are painting a picture that the opportunities
are almost exhausted in Brazil, which is an interesting dynamic.
Mr. Daudelin: As I said, there are opportunities for Canadian
companies, but in terms of political projects — because that was the essence of
your question — I cannot see many.
Even among the BRIC countries, Brazil is in a privileged position. Brazil
does not really need the others. Brazil is not a single-resource exporting
country like Russia. It is a democratic country, which China is not. Brazil does
not have the same scale of problems that India has. Even among the BRIC
countries they look good. They do not need us.
That does not mean that we should have no policy, that we should not keep an
eye on them, and that we should not become more knowledgeable about them. That
is not to say that they may not need us for some things, but this is more in the
realm of small-scale diplomacy, and, I would say, intelligent management of the
relationship, rather than some kind of strategic partnership that would never
fly in Brasilia.
The Chair: If I can sum up that answer, you are saying they are
changing their position and we should be aware of it, and we will not
necessarily change our foreign policy or have the opportunities they may have.
Mr. Daudelin: Exactly.
The Chair: Thank you. You have obviously generated a lot of interest,
and we are way over our time. Thank you for being patient with us. You have
added to our thinking on Canadian policy and interests in the region, and
particularly in Brazil.
I think you have given us a lot to think about and reflect on, and it will be
perhaps one of the measures as other witnesses come forward. Thank you very much