Written evidence from Jacques Arnold, D.L. (SAM0002)

Mr. Arnold was Member of Parliament for Gravesham from 1987 to 1997. During that time he was Secretary of the All-Party Latin America Group and Chairman of the All-Party Brazil Group.  He was also twice Secretary of the Conservative Backbench Committee on Foreign & Commonwealth Affairs, and a Member of the Executive Committee of the British Group of the Inter-Parliamentary Union.

As such, he spoke and answered questions in Portuguese at a Committee of the Brazilian Congress on the subject of the working of parliamentary democracy during their constitutional referendum; he addressed in Spanish the National Assembly of Panama; he acted as an international observer at the 1988 Chilean Plebiscite; he led Parliamentary delegations to Brazil, Chile and Colombia; and was a member of the Argentine British Conference, working towards restoring relations following the South Atlantic conflict.

Before entering the House, he was Midland Bank Group Deputy Representative in Brazil, establishing their office in São Paulo. He was then Regional Director for Latin America of Thomas Cook Bankers, establishing offices in São Paulo, Buenos Aires, Caracas and Mexico City, and operating centres in Santiago, Lima and Montevideo.

Since leaving the House, he has been Special Adviser to a number of British companies, notably, G.E.C., BAE Systems, VT Group and FIRST.

SUMMARY

1. Latin America – a clear world region.

2. The British connection – a longstanding relationship.

3. Recent activities – High-level focus.

4. Brexit opportunities – potential new trade deals.

5. Latin America in London – a wasting asset.

6. British Culture and the real English language - great assets.

7. Local British support for Investors and Exporters - a mixed bag,

8. The Venezuelan tragedy – a missed British opportunity.

9. Bolsonaro’s Brazil – we must be positive, not censorious.

10. Modern Argentina – at last a good President, a massive opportunity.

11. Don’t treat South America as a homogeneous whole.

12. A moderate, capitalist, western, peaceful, pro-British continent of opportunity.

1. South America and Latin America

It is unfortunate that the Committee has restricted its Inquiry to South America. This excludes Mexico, Central America, Cuba, the Dominican Republic and Haiti, which work together with the South American countries as Latin America.

2. The British connection.

Britain was heavily involved with the independence struggles of the Region.  The then Foreign Secretary, George Canning, in a debate in the House in 1826, said: “I called the New World into existence to redress the balance of the Old”. Admiral Lord Cochrane led the naval efforts of both Chile and Brazil in their independence battles. Hundreds of British and Irish ex-servicemen fought throughout the continent, not least in the Legión Británica under the Liberator Simón Bolívar in the north.  A later British Emissary, John Ponsonby mediated the independence of Uruguay. 

Following independence, Britain made massive investments and established enterprises in the railways, ports and their services, banking, telegraph, livestock rearing and processing, public utilities, power generation and distribution, and a wide variety of other activities, even introducing the continent to football. 

Brazil supported us in both world wars, sending Field Ambulances in the first, and an expeditionary force serving alongside us in Italy in the second.  During the second world war, British and local communities in Brazil, Argentina and elsewhere financed and manned RAF squadrons.

Britain was the leading trading and investment partner until the second world war. Distressed asset sales during the war, and nationalisation of British assets thereafter, caused British investors, themselves under strain, to turn elsewhere. British flagged vessels remained the majority in Latin American ports until the 1960s.

The Bank of London & South America, an amalgamation of fore-running British banks in the region, was a market leader in terms of quality of service and its local client lists. It was acquired by Lloyds Bank, which, in due course, decided to split it up, and sell it, destroying a remarkable British asset. HSBC came late to the scene, but impressively acquired major banks and created a banking network across the continent, only to reverse the process and depart from almost all the region.

The Vestey Group ran massive livestock rearing and food production facilities, complete with an integrated shipping fleet. They have left their massive operations in Argentina and Uruguay (Fray Bentos), and sold the Blue Star Line. They have lost further operation to Chávez nationalisations in Venezuela.  They remain there and in Brazil.

BAT Industries have massive operations throughout the continent, particularly in their Souza Cruz subsidiary in Brazil. British mining has been powerful, notably, British American, BHT Billiton, Glencore, Rio Tinto, and also British-quoted Antofagasta. Other longstanding investments remain operating, in the oil, pharmaceutical, food, cleaning products, textiles, and other sectors.

Despite the departure of some great historic British names, I have been impressed by a significant number of British companies and entrepreneurs active in South America, frequently with local partners.We need many more.

3. Recent activities.

The Canning Agenda of former Foreign Secretary William Hague has accentuated the importance of the region, with the re-opening of diplomatic missions, and the extension of others. His transfer of local efforts from human rights and green issues to fostering British trade and investment has galvanised our local missions. The more recent visit of former Foreign Secretary Boris Johnson to Peru, Chile and Argentina has had favourable reverberations.  Royal visits to the region have been invaluable.

4. Brexit opportunities.

I have long been frustrated by Latin American presidents and ministers visiting London, en route to Brussels, and being enthused by the claim that Britain is their natural ally in the counsels of Europe, as we are not competitors of their products, but are their natural allies due to our support for free trade. However, they are invariably blocked by protectionist France, quietly supported by Poland, Spain and Ireland. To this day, Mercosur, including Brazil and Argentina, has no trade deal with the EU.

For those trade agreements between the EU and Latin American countries, or local country groupings, we should offer immediately to mirror the terms for British trade with them, for the foreseeable future, with an accompanying offer to make improvements and more suitable agreements.

Western-educated, and frequently English-speaking, their professionals (frequently British graduates) are well-disposed towards us, even if puzzled by our lack of attention.  The countries are all democratic, subject to the rule of law, with business cultures similar to our own.

It is quite clear that Latin America is immediately ready to negotiate wide-ranging trade and investment deals, and they know what they want. On the other hand, I am not clear we have thought through what we want in return.  Nor are they being given suitable priority.

5. Latin America in London.

Established in 1943 by experienced businessmen, Canning House was in the last century a vibrant centre of Latin American business, political and cultural activity.  Latin American Presidents, Ministers, and other luminaries, habitually occupied the 6 p.m. slot with a session of speech and questions.  This attracted serious audiences of senior businessmen, politicians and academics, highlighting the importance of Latin America. LATAG, the Trade Advisory Group, was central to their activity, and the involvement of the business community. 

The Blair government took LATAG in-house, thus undermining the business connection. The unique specialist library was disposed of. Finally, the facile decision was taken to sell their remaining lease on Canning House itself, in Belgrave Square; instead of concentrating on the arduous task of ensuring that the institution remained tied in with the British-Latin American business community. The institution itself decamped to an off-street site around the square, and finally to the obscurity of Fitzrovia.

Despite an array of inactive celebrities on their Vice-Presidents list, and an apparent indifference as to their fate by the FCO, I believe Canning House remains a significant potential asset in London. It should be the focus of attention to ensure it once again becomes worthy of the support of the Latin American embassies in London, relevant to the related business communities, and a hive of British-Latin American activity.

6. British Culture and the real English language.

The British heritage in Latin America has resulted in our having some remarkable local institutions.

Founded in 1934, as a local institution, the Cultura Inglesa, in Brazil, with branches throughout the country, has in its 84 years taught English to more than a million Brazilians.  The surpluses it has generated have financed serious cultural activities and British visits.  Those funds have also financed a major headquarters in São Paulo, which also houses our Consulate-General, the Regional Trade Commissioner, and other relevant local British institutions.

In Chile, the Universidad Chileno-Británica de Cultura has grown out of the British-Chilean Institute of Culture, founded in 1938. It ranks amongst the private Chilean universities, and this year has been recommended for official Chilean recognition as a University.

Similar institutions exist in Peru, and no doubt elsewhere.  My experience has been that the staff of the British Council have viewed these institutions as rivals, which has not been constructive.

British universities have been very active in Latin America, which has occasioned a steady flow of Latin American students, particularly postgraduates, to this country. The Chevening scholarships have produced a notable result. This has led to British graduate groups springing up in cities all over the continent, with obvious benefit. The student visa, and post-graduation visa regime, nevertheless poses a significant problem and deserves rapid attention.

For similar heritage reasons, we have a wealth of British primary and secondary schools in the region.  St. Paul’s School in São Paulo, St. George’s in Buenos Aires, and The Grange School in Santiago, have quite extraordinary alumni lists of local people who have gone on to professional success. Their potential is obvious.  Furthermore, there is an Association of British Schools in Chile, and no doubt elsewhere, which must be fostered.

7. Local British support for Investors and Exporters.

Although EU protectionism is unhelpful, nevertheless Italy, Spain, France, and Germany out-perform us.

In the case of the latter, the network of the German Chambers of Commerce in the region, sponsored, financed, and even staffed by their Association in Germany, should be studied and emulated. Our own British Chambers of Commerce have more the nature of local business luncheon clubs, and attention must be paid to developing their capabilities to pro-actively support incoming British investors and exporters.

The commercial sections of our diplomatic missions, which in so many ways are extremely effective, should work closely with them, and should also give a priority to developing them as a valued additional local asset.

It is also essential that our diplomats must be fluent in the respective languages, Portuguese in Brazil, and Spanish in the remainder of the Region. Recent announcements are to be welcomed.

The British Consul-General in São Paulo (the region’s leading business centre), Joanna Crellin, has been appointed H.M. Trade Commissioner for Latin America and the Caribbean. Her team must be staffed up, and her two roles be separated.

8. The Venezuelan tragedy.

The Venezuelan oil deposits are reported to be the largest in the world. Historically they have been exploited by PdVSA, the national oil company, nationalised long before Chávez, which was professionally-run and laid the golden eggs. The politicians originally kept it that way, although the use of the golden eggs was open to controversy.

By 1998, the population was disillusioned by the corruption and failure to diversify the economy. The old parties were exhausted and discredited. The electoral battle became one between two new brooms. Hugo Chávez, with the support of the working classes, and Henrique Salas-Romer, with the support of the middle and upper classes. Numbers prevailed, and Chávez was elected.

Hugo Chávez was effectively an open jug, a typical Latin American army officer, strayed into politics, with good intentions, but no coherent policy. He originally sought an extension of Venezuela’s glorious past – declaring a Bolivarian Republic, a tribute to the country’s Liberator.  The tragedy is that the United States, in a powerful echo of their traditional “Uncle Sam” approach to Latin America, allied with the electorally defeated local interest, gave Chávez no quarter, and alienated him, particularly with support for a failed coup in 2002, when he was briefly detained. This inflamed his anti-Americanism, which led him to use Venezuelan resources to support Fidel Castro’s Cuba and Sandinista Nicaragua, attempts to subvert the Caribbean islands, and even to finance the buses in Mayor Livingstone’s London. He devised the ill-defined platitude of “21st century Socialism”.

The parallel tragedy was Britain’s failure to use its advantages. In an inspired initiative, our then Ambassador, Richard Wilkinson, pre-election, brought Chávez to London for a programme, an inspired piece of talent spotting. Chávez was eternally grateful, frequently referring to Britain as the first country to take him seriously. We had a magnificent opportunity to use that unique position to offer guidance and friendship. We didn’t.  An official visit to London never materialised. A private visit he made to London in 2006, invited by various left-wing interests, resulted in a stand-off with the British government, neither side wishing to be the first to make a request to meet. I understand the FCO had the good sense of arranging a meeting at Heathrow with the former Ambassador, who had left Venezuela in 2000.  Our treatment of President Chávez may have been overridden by our need to cooperate with the Americans – who knows?

The onward trajectory of Chávez,  up to his death in 2013, is well known. The record of his inadequate successor, Nicolás Maduro, has taken his country to disaster, PdVSA mismanaged, and the economy destroyed. The solution lies in the hands of Venezuelans themselves.  We should however be ready to help a successor government.

9. Bolsonaro’s Brazil.

Brazil has a long record of growth, despite the politicians and a period of military dictatorship. It is the world’s eighth economy with vast potential, not least based upon a large population, little social or racial unrest, an abundance of primary mineral and agricultural riches, industrialisation, a rapidly growing middle-class, extending education, and an inherent self-confidence.

The election as President of Brazil of Luiz Inácio Lula da Silva in 2003 was a tribute to opportunity in Brazil. He had risen from a child, born in the poverty-stricken Northeast, selling oranges and matches on the streets of the port city of Santos, rising via the São Paulo trades unions, to the Presidency, which he handled with inspired good sense. He was propelled there by his Workers’ Party (PT), which far too commonly also fell prey to corruption. His succession in 2003 was expected to fall to his inspired Chief-of-Staff, José Dirceu. However the latter became entangled in the “mensalão” corruption scandal. The new Chief-of-Staff was Dilma Roussef, apparently one of the few clean at the centre of affairs, who succeeded as candidate, and won the 2010 presidential election - the only woman ever to do so. Unfortunately, she also turned out to be involved in corruption, the scandal at Petrobrás, the state oil company of which she was previously President. She was impeached in 2016, and replaced by an interim President, Michel Temer, who himself became entangled in corruption allegations. Politicians by then had a dismal reputation, and disillusion with the PT was widespread.

This provided the opportunity for Jair Bolsonaro, a former army officer, and a longstanding Federal Congressman, a member of the Social Liberal Party. Using language reminiscent of Trump’s electoral approach, he features in the longstanding tradition of old-style Brazilian politicians. He is nevertheless likely to appoint an effective and responsive government, not least of very capable people. His election was largely due to disgust with corruption by the PT, and public fears of violent crime, an affliction debilitating the big population centres.

It is essential that our approach to the new President and his government is not tainted with the western fashionable sensoriousness (of the sort that left us standing in the handling of the newly elected President Trump, as one of the last principal world capitals for him to visit). We must be positive.

10. Modern Argentina.

Perhaps more than most, Britain was involved in the independence and economic development of the country, with its economy fashioned to export natural products to Britain and receive industrial goods in return. Buenos Aires, its surrounding Estancias, and its advanced railway system attracted British immigrants of all classes.  Evidence remains with the likes of the Anglican cathedral of St. John the Baptist in central Buenos Aires. It is the most deeply cultured city in the continent.

This golden period came under strain as a result of the British Imperial Conference at Ottawa in 1932, when a number of Dominions ganged up against Argentina (until then known informally as the Spanish-speaking Dominion) as a commercial rival, against which Imperial Preference duties were to apply. It is arguable that this led to economic depression which facilitated Juan Perón’s rise to power.

The cancer of Peronism, interspersed with military governments, has haunted and presided over the decline of Argentina from its previous first-world status. That culminated in a military President, General Leopold Galtieri, using an invasion of the Falklands as a distraction from his serious domestic problems. It was a phenomenal miscalculation. He assumed that the invasion of the Falklands, if bloodless, would be handled by the U.N. as was the Indian invasion of the Portuguese colonies in the subcontinent, becoming a fait accompli. He assumed a distant country “run by a couple of women” would be a pushover. The rest is history.  His defeat resulted in the restoration of democracy, but also of Peronism.

It is only when the exhausted Argentine electorate, yearning for better things, elected the current President, Mauricio Macri, a successful businessman, that the country’s potential changed.  He is currently struggling with the poisonous legacy left to him by his predecessors, the Kirschners. Nevertheless there are massive opportunities for British investors to come in to share in a considerable long-term opportunity starting from a briefly low point.

11. Don’t treat Latin America as a homogeneous whole.

Each country is a distinctive entity, and should be treated as such. Other major countries are:

Chile – independent with the support of Admiral Lord Cochrane – our navies remain close to this day, the Chilean frequently buying ex-Royal Navy ships. With the exception of the Pinochet years, the country has been a democracy since the nineteenth century. The current President, Sebastián Piñera, like his predecessor Michelle Bachelet, with whom he has alternated, is a second term president (Chilean Presidents may not serve successive terms). He is also a successful businessman. Both the Duke of Cambridge, and his wife separately, spent teenage   time in the south of the country, on “Operation Raleigh”. The country is well-run, stable and prosperous, and significantly pro-British.

Peru - the cradle of its Inca heritage at Macchu Pichu, has a powerful mining sector, with leading British investment. Briefly headed by President Kuczynski, a strong Anglophile, he resigned early this year, having been caught up in a local scandal embroiling the Brazilian constructor, Odebrecht. Nevertheless, the succession was stable, and our opportunities remain.

Colombia – a country with immense potential, but until recently raddled by Farc insurgency. President Juan Manuel Santos, another Anglophile, achieved a Peace Treaty, the 2016 Nobel Peace Prize, and the first ever Colombian State visit to Britain. We have been closely involved over the years in providing security support, and assistance in tackling the serious drug trade.  The country presents a massive opportunity.

Bolivia and Ecuador were participants in Hugo Chávez’s Alba, inspired by ideology, but also by Venezuela’s oil money. Bolivia, a very indigenous high Andean country, with a President to match, Evo Morales, also has a lowland prosperous area around Santa Cruz.  Ecuador, until recently run by Rafael Correa, who unwisely gave Assange asylum in his London Embassy (where he remains, six years later), by definition sitting on the equator, was the meeting place of the two great Conquistadores of the independence struggle, José de San Martín and Simón Bolívar. A country split between high Andes, and hot coastal lowlands, it possesses the Galapagos, a source of environmental worries.

Last but not least, Uruguay and Paraguay. The former, in the shadow of its vast neighbours, Argentina and Brazil, is stable and prosperous. Paraguay, now free of its drawn out dictatorship, is less stable, but benefits from power-generation, selling its Itaipú electricity to Brazil. We have reopened our Asunción Embassy, which should never have been closed.

12. A moderate, capitalist, western, peaceful, pro-British continent of opportunity.

Latin America is today almost entirely democratic, free-enterprise, friendly, without conflict, ready to do business based upon a western-educated world-class business community.  It remains puzzled by our relative inactivity.  The long-term opportunities are vast for specialist and niche exporters and investors. I hope this Report will turbo-charge our efforts.

November 2018