Written evidence from the Foreign and Commonwealth Office (SAM0018)

PART I

Political Developments

Political Landscape

South America is characterised by young heterogeneous democracies and, with the exception of Venezuela, regular, free and fair elections. The political landscape has changed significantly in the last four years as the pink tide of left wing governments receded in Argentina, Brazil, Chile, and there is a more moderate centre-left government in Ecuador. Colombia and Peru have maintained centre-right governments. The moderate left remains in power in Uruguay and a left-wing populist Evo Morales is holding on in Bolivia.

Left-wing populists dominated the region in the 2000s with Chavez, Kirchner, Correa, Morales and Lula all using the commodities boom to increase the role of the state in the economy. This was accompanied in some cases by restrictions on media freedoms and the closing of democratic space for opposition groups. Hugo Chavez tried to export his version of “21st century socialism” across the region using his anti-US, anti-free trade ALBA grouping. Brazil in turn attempted to reassert its leadership of the region by promoting the Union of South American Nations (UNASUR) and the Community of Latin American and Caribbean States (CELAC). They were also designed to counter US influence and the Organisation of American States (OAS), seen as a vehicle for US foreign policy in the region. The turn to the right in recent years has significantly weakened ALBA and UNASUR and seen the emergence of the more pro-market Pacific Alliance, made up of Peru, Colombia, Chile and Mexico.

The region retains a reputation for political unpredictability and major challenges around high levels of violence, weak rule of law and widespread corruption. Macri’s difficulties in Argentina, driven by domestic vulnerabilities and a complex global economic scenario, have increased uncertainty around his possible re-election in the October 2019 elections. The Venezuela crisis, exporting instability and unprecedented numbers of migrants, is having a negative impact across the region. Populism is still a force, as seen by the election of Bolsonaro in Brazil who presented himself as an outsider thereby appealing to voters tired of traditional politics, a worsening security situation and endless corruption scandals. It remains uncertain as to which direction Bolsonaro will take Brazil.

Overall, however, the political trajectory remains positive, and Chile, Peru, Colombia, Uruguay and Paraguay show that, increasingly, countries in the region can maintain consistent economic and social policies through democratic changes of power.

For the moment, South America is now the region outside Europe, North America and Australasia most closely aligned with UK values. Embedding human rights, striving for gender equality, tackling climate change and strengthening the rules-based international order are on their agenda too. At the same time, religion plays an important role in society and politics of most countries, which coincides with the rise of Christian evangelical churches.

Regional stability

Venezuela

The political, security and economic situation in Venezuela continues to deteriorate. In Caracas, the corrupt, authoritarian government props up an unsustainable economy with high levels of foreign debt through short-term, contradictory policies.  Meanwhile, the people suffer hyperinflation, a plummeting currency and an acute shortage of cash with growing insecurity, and chronic shortages of food and medicines. 

The political landscape is deeply polarised. President Maduro has undermined the democratic fabric of the country and resorted to increasingly violent repression of the opposition and civil society. Despite prolonged public protests between April and July 2017, the opposition is enfeebled and fractured, and has lost credibility and trust.

In addition to doing damage in his own country, Maduro is also accused of allowing illegal armed groups like dissident FARC and the National Liberation Army (ELN) from Colombia to take refuge in Venezuela. There have also been a number of incidents where Venezuelan armed forces encroached/strayed onto Colombian and Guyanese territory, provoking strong reactions from the respective governments.

Economic collapse in Venezuela has sparked a humanitarian crisis that is affecting the whole region. Over 2.3 million Venezuelans have taken refuge abroad according to the International Organisation for Migration.  This is the greatest migrant crises ever faced by South America. It is comparable in scale to what has happened in Yemen or Syria, and a tragic reversal of the generosity shown by Venezuela to refugees and migrants from elsewhere in the region during the last century.

Colombia

The signature of a peace agreement in 2016, which ended a 50-year conflict and transformed the FARC from guerrilla group to political party, is a remarkable achievement. However, the peace process is fragile and huge challenges remain. Some are rooted in ideological and political disagreements that drove the FARC to conflict in the 1950s; land disputes, agriculture, poverty and income disparity. Although Colombia today is a safer and more secure country than it was, post conflict related human rights violations continue. The withdrawal of the FARC from many parts of the country creates challenges for governance and security in some areas, seeing new cycles of local violence between illegal armed groups as they fight to control illicit economies, including drugs, deforestation and illegal mining. Talks with ELN have stalled and the group continues their campaign of violence and intimidation in communities in former FARC areas. Violence, particularly surrounding cocaine trafficking, is spilling over into neighbouring Ecuador.

President Duque said before and since election that he will change aspects of the peace agreement, and it is clear that he has a democratic mandate to do so.  However, he also said he will not scrap the peace deal, and has noticeably softened his rhetoric since taking office; the fact that the 2019 budget will fund peace institutions is proof of Duque’s will to continue with implementation. The ongoing crisis in Venezuela is also Colombia’s crisis. Approximately 1.5m migrants of the 2.3m are in Colombia.

Serious and Organised Crime (SOC)

Cocaine trafficking remains the key driver behind SOC in Latin America and represents the primary threat to the UK. According to the UNODC World Drug Report 2017, cultivation and production is now at its ‘highest level ever’, having risen globally by 56 per cent during the period 2013–2016. Colombia currently accounts for two-thirds of global coca leaf production.

Illegal mining – particularly of gold – is increasing in frequency and impact. It brings with it related criminality including deforestation (affecting climate change), extortion, forced prostitution and labour and people trafficking. Kidnap and child sexual exploitation remain serious issues, particularly in countries with weak rule of law.

Coca cultivation is increasing throughout all coca-producing countries, particularly in Colombia, which is producing coca at record levels. Total cocaine production in 2016 was 1,410 tonnes. In Colombia, UNODC report that coca levels increased again in 2017 by 17%.

In 2016, Uruguay became the first country in the world to legalise the recreational use of cannabis. It is too early to assess the long-term impact of this policy, but the legislation appears to have had little impact on consumption.

Corruption and the Rule of Law.

Corruption is embedded in the political cultures of most of South America. Chile and Uruguay are notable exceptions, with scores on the Transparency International Corruption Perception Index comparable to some Western countries. In countries where corruption is high, it is perceived as how the system works. Corruption undermines the cohesion of a state, impacts the rule of law, and can be a disincentive to doing business in the region. 

The strength of institutions and the rule of law varies throughout the region. With the exception of Venezuela, democratic processes are reasonably robust, and the separation of powers largely respected. However, corruption, mismanagement, underfunding and in some countries their geographic size mean that implementation of the rule of law is patchy, particularly in rural areas. Governments struggle to provide an adequate response to SOC in drugs, illegal logging and illegal mining. Corruption helps SOC to flourish, because illegal networks enjoy operating where state oversight can be compromised. High levels of violence and violent crime remain a major challenge.

However, there are signs that the region is beginning to tackle high-level corruption, with ex-presidents, ministers, politicians, senators, judges and business leaders in jail or facing judicial proceedings in the wake of the Brazilian Lava Jato and region-wide Odebrecht scandals. Awareness of the damage caused by corruption has significantly increased and it is a subject that is widely discussed as part of the general political debate, in some cases defining recent elections such as in Brazil.

The private sector is helping to raise awareness, civil society groups and NGOs are improving their technical competence at overseeing governments’ performance, universities are training public officials, and the media has played a significant role in reporting corruption cases and raising awareness about the extent of the problem.

Human Rights

The FCO’s annual human rights report sets out the UK’s assessment and HMG’s work to improve the human rights landscape. Freedom of expression and protection of rights are key principles for democracies and are evident in nearly all South American countries. Corporal punishment and death penalty have all but disappeared. The death penalty remains legal, but only in exceptional circumstances (such as war crimes) in Brazil, Chile and Peru. However, despite signing up to international human rights standards, implementation is piecemeal, mainly due to a lack of capacity and sometimes a lack of political will.

Observance of LGBTI rights is variable across South America.  The Inter-American Court of Human Rights affirmed in January 2018 that the American Convention on Human Rights requires countries to allow same-sex couples to access civil marriage, and all of the rights and benefits that derive from it.  Brazil, Argentina and Uruguay have been leading advocates in raising equality and sexual orientation at the UN. Uruguay and Argentina played a leading role in persuading other South American states to consider sexual orientation discrimination as a human rights issue. In 2016, Uruguay led a coalition of American states at the UN Human Rights Council to create the first ever mandate to promote and protect LGBTI rights at the UN. However, society in South America is conservative and even where legislation is progressive, discrimination persists, particularly in rural areas.

There is broad support for implementation of UNSC Resolution 1325 in the region. The UK’s work in Colombia has helped record cases of over 15,000 victims of conflict related sexual violence to the country’s national victims unit.

Colombia and Venezuela are two of thirty global FCO human rights priority countries. Despite a general improvement in the security situation across Colombia, conflict related human rights violations remains a concern, including localised violence in post conflict areas, sexual violence and killing of human rights defenders (HRDs). The UN reported at least 121 human rights defenders and social leaders killed in 2017.  In the first six months of 2018, there were 34 confirmed killings – with another 46 killings being investigated; Amnesty call Colombia the most dangerous country in the world for human rights defenders. Victims from minority communities are disproportionately represented. The Colombian authorities are doing what they can to address the issue but are hampered by weak state presence in the areas most affected.

The ongoing political and economic crisis in Venezuela has resulted in a broad range of civil and political human rights violations. Millions of Venezuelans are unable to meet basic needs and are forced to emigrate across land borders into Colombia, Brazil and beyond. This has increased the potential for human rights abuses and manifestations of modern slavery. Civil society and UN agencies believe that labour exploitation and sexual exploitation are increasing in the border regions, alongside illegal mining. The inability to find work has also led to an increase in gangs and prostitution. Transgender people, with no legal rights or protection in Venezuela, represent a particularly vulnerable minority group.  Migration by people from indigenous communities is particularly high.

Although there is a severe lack of information and data about the extent of modern slavery in Venezuela, there is consensus that the number of cases is increasing, and this is likely to continue as the humanitarian crisis worsens and the number of migrants swells.

There are grave concerns over the increasingly authoritarianism of the Maduro regime. The death of opposition figure Fernando Alban under suspicious circumstances has galvanised international condemnation of the regime’s heavy-handed response to protests and criticism from the political opposition. The UN Office High Commissioner for Human Rights reported in September 2017 at least 124 deaths in protests between May-August 2017 and the arbitrary detention of over 5000 people.

Brazilian President elect Bolsonaro has received public criticism over some controversial statements, made when he was a MP not Presidential candidate, regarding human rights in Brazil (mainly regarding women, LGBTI and indigenous people). He will take office on 1 January and the Embassy is monitoring his policy closely. The British Embassy in Brasilia supports the promotion and protection of human rights in Brazil through projects and institutional engagement with local authorities and organized civil society.

Defence and Security

Although a growing presence in international peacekeeping, South America is not yet a key player on the big global security issues. Uruguay is by far the biggest contributor of UN peacekeepers (955) followed by Argentina and Brazil (around 300 each). Chile has reduced troops but used to play a key role in MINUSTAH. Peru contributes 231 and Bolivia and Ecuador are in double digits. Colombia, which along with Brazil has the largest military in the region (approximately 500,000), only provides five. As Colombia moves away from internal conflict, their Armed Forces are increasingly looking outwards, not least to justify their size. They recently ratified a cooperation agreement with NATO and are in the process of ratifying a Framework Partnership Agreement with the EU on joint work in crisis missions.

In general, the defence posture of the region is non-interventionist and inward looking, preferring to target resources on internal threats related to Serious Organised Crime. The Lima Group has unequivocally discounted military action to solve the Venezuela crisis. There is scope for closer bilateral defence cooperation across the region.

Regional and Foreign Policy

There are two seats on the UNSC reserved for the Latin America and Caribbean group, currently taken by Peru and Bolivia. However, unlike the Middle East or Africa South America does not tend to act as a unified bloc although there is some caucusing through the Group of Latin American and Caribbean Countries (GRULAC).

The crisis in Venezuela has exposed the fault line between the majority of broadly centrist countries that make up the Lima Group formed in August 2017 to address the Venezuela crisis, and the outlier leftist countries of ALBA (Bolivia, Cuba, Nicaragua) who still support Venezuela. Ecuador was in the latter and is moving towards the former.  In the UN, the former support international norms and align with UK values, for instance on human rights and non-proliferation, while the latter take anti-capitalist, nationalistic positions tending to support Russia and against UK positions. Because of the split CELAC is effectively paralysed, UNASUR all but dead, and the OAS unable to reach consensus.

There are however still some fora in which South America does act collectively. All the states of South America are members of G77 and many of them members of the Non-Aligned Movement so will unify when these groups act as a bloc. A general philosophy of ‘Latin American brotherhood’ and regional solidarity, independent of political orientations, binds the region as a whole.

International Influencers

The key international external actors in the region are the US and China. The US has a long history of involvement and strategic interests in the Colombia peace process, addressing the Venezuela crisis, and combatting SOC, particularly through their war on drugs (Plan Colombia has spent upwards of USD10 billion over the last decade). It looks to maintain relations with likeminded governments in Argentina, Chile, Colombia, and now Brazil. The US contains the highest number of Spanish speakers outside of Mexico.

The EU maintains a strong cultural and political influence in much of South America, given the huge diaspora, and dual nationality of many politicians, from Spain, Portugal and Italy. Spain has the most investment and influence, but France, Italy, Germany and UK all have wide networks of Embassies and commercial interests. The EU Commission has large bilateral cooperation programmes with Colombia, Ecuador, Peru and Bolivia.

China has significantly expanded its economic footprint in South America over the last decade. It is a key market for the region’s raw materials and commodities. China is now the single largest trading partner of Brazil, Chile, Peru and Uruguay. Securing access to South America’s abundant raw materials, food production and commodities are key drivers of engagement, but Chinese finance is also helping to plug important infrastructure gaps. Their strict doctrine of non-interference in domestic affairs and tendency not to lecture on values are broadly welcomed by regional governments.

China is increasing defence engagement and deploying more soft power resources to South America (media, Confucius Institutes, and people-to-people links) to bolster its commercial position, integrate itself more deeply in economies, and counter negative perceptions of its activities in the region. Relationships are becoming increasingly more sophisticated and will inevitably lead to greater political influence; Paraguay is the only country in South America that recognises Taiwan.

Russia is a growing presence in South America, and it maintains relationships and influence throughout the region, including Venezuela, Brazil, Argentina, Paraguay and Bolivia (the latter consistently supporting Russia at the UN Security Council). And it prizes the relationship with Brazil through the BRICS

Venezuela maintains a core group of allies strong enough to block multilateral sanctions in international fora. States friendly to the Venezuelan regime include Cuba, China, Russia, Bolivia, Nicaragua, North Korea, Iran and Turkey.  They continue to provide rhetorical and, in the case of China and Russia, financial support to Maduro.  Cuban assistance and advice on socio-political control remains crucial to regime survival.

Economic Developments

South America has a population of over 400m, with falling poverty levels, a growing middle class and abundant natural resources (oil and gas, mineral deposits, freshwater, agriculture). The economy is broadly commodities based. Ecuador, Colombia, Bolivia, Venezuela, Brazil and to a lesser extent Argentina are all oil and gas producers; Ecuador particularly is struggling to diversify its exports. Mining accounts for over 50% of exports from Peru and Chile. Agriculture is also key, South America is the world’s largest beef exporter, and agriculture is a huge sector for employment. It provides prosperity and opportunity across the region. It can also have a negative environmental and social impact, particularly in relation to land ownership. Examples are the huge cattle farms of Brazil and some African palm plantations in Colombia and Ecuador, both in the top ten exporters of palm oil.

The combined GDP of South America is US$3.6tn, compared to South Asia ($3.4tn), South East Asia ($2.9tn), the Middle East ($2.8tn), and Africa (US$2.33tn). Despite Brazil’s sharp economic downturn from 2013, economic and political indicators are now more steady (0.6% expected growth across the region this year). The main players Argentina, Brazil, Chile, Colombia and Peru, two in the G20, represent 88% of the regional economy, and are championing free trade and resisting the tide of protectionism, including from the US. They are members of the OECD or looking to join, and forging new free trade alliances through bilateral FTAs, the CPTPP or the Pacific Alliance. Our economies are largely complementary, and we have run a trade surplus with the region every year since 2011. In 2017, the OECD classified Chile and Uruguay as high-income countries, meaning that neither can receive Overseas Development Assistance.

The last few years have been difficult for Brazil, with the commodities price crash of 2015 plunging it into the longest and deepest recession in its history. However, having recently returned to growth, the economic indicators are now moving in the right direction and Brazil appears to have turned the corner. Much depends on the economic reforms the new Government tries to put in place.

Argentina has kicked of a programme of economic reform under President Macri. Recent strengthening in the US dollar has raised concerns about Argentina’s ability to service its large amounts of dollar-denominated debt. Argentina sought IMF assistance to stabilise its economy, agreeing to a programme in June, which was later revised in October. The revised programme will allow Argentina to borrow $56.3 billion over three years, conditional on tightening fiscal policy and maintaining social assistance spending.

Extractive Industries

Extractive industries are central to the economies of most South American countries. The UK does not regard the mining and trading of 3TG (tin, tantalum, tungsten and gold, also known as "conflict minerals") as problematic in itself. These minerals are key components for modern technology. Under the right conditions, mining can build both prosperity and security for local communities.

However, illegal mining is increasingly problematic, representing upwards of 90% of the total gold mined in parts of South America. Criminality associated with the narcotics and illegal mining industries – including forced labour, human trafficking, sexual exploitation– also directly impacts the UK’s humanitarian and modern slavery priorities.

Illegal and poorly regulated mining of conflict minerals is responsible for high levels of deforestation, air pollution and introduction of heavy metals in water supplies. Artisanal mining can also have a damaging effect on the environment and lead to friction between governments and local indigenous communities, who view it as a cultural right.

The UK is committed to addressing these risks by encouraging compliance with OECD’s Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected and High-Risk Areas to increase the supply of responsible minerals. It helps create partnerships with stakeholders such as international organisations, local government and civil society organisations to support better mining practices in a number of countries. In 2017 the UK funded an OECD project on ‘Responsible Mineral Supply Chains in Colombia through OECD Due Diligence’ and have committed to support phase two of this project this financial year. The UK has also encouraged British and International companies to support the UN's Voluntary Principles on Security and Human Rights (VPs). The VPs are designed to guide businesses in maintaining safety and security of their operations with respect for human rights and prevent negative impact on local communities.

HMG’s regional Conflict Stability and Security Fund (CSSF) SOC programme will consider the feasibility of further actions as part of its design refresh for the next Spending Round.

Climate Change

South America will face severe challenges as a result of a warmer climate. Impacts include more regular and extreme weather events including the frequency and mean intensity of storms and tropical cyclones, and a strong increase in heat extremes and droughts exacerbated by melting glaciers. This is also likely to impact biodiversity, agriculture, tourism, coastal infrastructure and energy systems such as those reliant on hydropower.

South America accounts for around a quarter of the world’s global forest coverage, and the Amazon alone accounts for nearly half of the world's tropical forest. South American efforts to combat deforestation will play an important role in curtailing emissions and meeting the Paris climate agreement. Colombia has set a target to halt deforestation in their Amazon region by 2020 and nationally by 2030 but will need the support of international partners if this is to be realised. Despite Brazil’s world-leading efforts to reduce deforestation from high historical levels, deforestation in the Amazon is again on the rise, perhaps to the highest level in a decade. This is as a result of market and political factors including the US-China trade war, weakening environmental regulations and protections for Indigenous Peoples and land speculation. There is significant uncertainty around the new administration in Brazil and how this will impact deforestation rates in the future.

International commitments to 2030 vary by country. From Argentina and Chile, whose pledges are based on increases from 2020 levels, to Chile whose targets are based on 2007 levels and Brazil, Peru and Colombia, which are based on reductions from 2005 levels or BAU projections. In most cases, countries have committed to going further should they receive international support. Some, such as Colombia, are vocal allies in supporting a global increase in ambition, including through the Cartagena Dialogue and High Ambition Coalition.

Almost 30% of the Domestic Energy Supply in South America originates from renewable sources, making it one of the cleanest regions in terms of energy production. Brazil is the seventh largest energy consumer in the world and is expected to at least double its electricity demand by 2030. Brazil consumes around 50% of all energy in South America but has one of the cleanest electric matrices in the world based mainly on the use of hydropower and is committed in maintaining this.

Mercosur / Pacific Alliance

There are two principal economic blocs in South America, Mercosur (the Southern Common Market) and the Pacific Alliance (PA).

Mercosur is a trade alliance and customs union founded in 1991, comprised of Argentina, Brazil, Paraguay and Uruguay. Venezuela has been suspended since December 2016.  It aims to eliminate barriers to the free movement of goods, people, and currency among member countries with a common external tariff though it has signed few FTAs. The EU has been negotiating an FTA with Mercosur for almost 20 years with negotiations paused on a number of occasions. If the EU-Mercosur agreement is agreed, this will cement significant EU commercial advantage – and for Mercosur it will provide an essential counterweight to Chinese commercial power.

The Pacific Alliance (PA) is made up of Chile, Colombia, Mexico and Peru. It was formed in 2011 as a trading bloc with the objective of reducing barriers and increasing integration between members. Since formation it has established an integrated stock exchange (MILA), reduced 92% of tariff barriers between members, and started negotiations on a free trade agreement with four Associate Member States (Australia, Canada, New Zealand, and Singapore). The four members are the most likeminded with the UK in the region, and the PA itself the most dynamic force for integration and economic liberalism, both key UK objectives. Seven of the eight member and associate members are also party to CPTPP (not Colombia). The UK is one of 52 international observers.

PART II

HMG footprint and governance structure

The UK has an embassy in all ten South American countries, with Brazil also containing four subordinate Posts in Belo Horizonte, Recife, Rio and Sao Paulo. Four of our embassies are small posts, with two UK-based FCO staff and a small local team. Teams are stretched, particularly in the smaller posts where potential to upscale work to promote UK interests could remain untapped without additional resource. Given competing priorities, this cannot be found from within the network. Partners Across Government (PAGs) are present throughout the region.

The work of our posts across South America is overseen by Americas Directorate in the FCO, the Americas Regional Board (ARB) and the Americas Network Corporate Board (ANCB).

The ARB is the cross-Whitehall group that considers broad Latin American and Caribbean issues. It has its secretariat in the FCO, is chaired by the FCO Americas Director, and is used by the whole Whitehall Americas community to develop coherent Whitehall advice and coordination and better UK strategic impact in the region.  It is accountable for the 5 cross-HMG strategies in Americas - Peru/Colombia/Venezuela; the Caribbean, Argentina, Brazil and Mexico. Two of these attract CSSF (Conflict, Security and Stability Fund) funding – HMG strategies on the Caribbean and Peru/Colombia/Venezuela – with the ARB also accountable for the CSSF programming that underpins delivery.

Our Policy Approach

South America is a region of growing economic potential. It is increasingly influential and important for UK interests in multilateral fora – particularly in one member one vote organisations (UN, WTO, OPCW, ITU). The Canning Agenda launched in 2010 was an attempt to redress decades of waning UK interest and ambition in what used to be a historical partner. It has established a solid platform for medium term gains – a stronger network of posts, tripling of Chevening scholarships, stronger ties in science and education. Those businesses with a longer-term approach to the region - including JCB, De La Rue, Anglo-American, BP and Shell – are flourishing with HMG support. Net UK investment is growing strongly, more than doubling in Brazil since 2010 from £6.4bn to £15bn. The regional visit to Argentina, Peru and Chile in May 2018 was the first by a Foreign Secretary to Peru in 50 years. We now have two trade envoys active in promoting UK understanding and engagement with Brazil, Colombia, Peru and Chile. There have been 33 Ministerial and PM Trade Envoy visits to the region since June 2017 (Annex 1).

Despite stiff competition from other players, the region is receptive to the ambition of Global Britain and a distinctive British offer based on our liberal and democratic values, our economic strengths, and our championing of free trade. South America represents an opportunity to forge new partnerships with those that share our values, believe and operate in the rules-based international system, and are keen to seize the opportunities that leaving the EU brings.  We have seen that with the right sort of political engagement, we can make inroads in areas not considered traditional UK strengths (e.g. securing the lead contractor status for the 2019 Lima PanAmerican Games through a Government to Government agreement). However, there is a perception that British business is less adventurous than its European competition and is missing opportunities.

South American partners support our global campaigns. There is real interest, and resonance, in the region for most of our priorities including good governance, action on climate change, violence against women, education for women and girls, human trafficking, and the Illegal Wildlife Trade. There is strong demand for British expertise in judicial reform and in tackling corruption and organised crime, building on successful programmes in Colombia and Peru. However NCA have recently reduced their footprint in the region. Defence diplomacy reinforces our political engagement, for example in Argentina, Uruguay, Brazil and Chile. When we engage, as with our lobbying on chemical weapons, they respond, and are prepared to push back against those – like Russia – who disagree. Colombia, Peru, Argentina, and Chile are all ready to join us on different elements of our global agenda.

We use regional groups to project the UK across the region, proactively tapping into the Latin American caucus and demonstrating our role as their natural global partner. We have supported the Lima Group’s lead role on Venezuela. We aim to coordinate more closely as we develop plans for an immediate regional humanitarian response, medium-term stabilisation and long-term Venezuela post-crisis. We are already an active observer of the Pacific Alliance. We have funded various projects in the four member states to build capacity in green finance, innovation, education, and OECD compliance. This year for the first time we are providing small scale funding for Pacific Alliance projects on green finance and education via the FCO’s own departmental policy programme. We are the leading non-Americas supporter of OAS programmes, mainly through our support for OAS-led initiatives in the Colombian Peace Process.

British soft power through the attractions of our language, our impartial civil service, our championing of open society, our expertise in services, our creative industries, our leadership against corruption, and our history of democratic evolution and stability, remains a major point of comparative advantage for Brand Britain across the region. We have a number of means of delivery; prominent among them are the British Council (who will submit their own evidence to the inquiry) and the BBC World Service. BBC Mundo is the BBC’s service for the Spanish-speaking world and is part of BBC World Service with offices in Buenos Aires and México, and reporters in Caracas, Bogotá, Santiago, Quito, and Lima. We use the Chevening scholarship programme throughout the region.

Priority relationships

Argentina. Since his election in November 2015, President Macri has sought an improved relationship with the UK as part of Argentina’s ‘global reinsertion.’  In September 2016, Sir Alan Duncan visited Argentina and agreed a Joint Communiqué that committed both countries to closer co-operation across the totality of our relationship. Cooperation increased as a result, such as the first defence talks in over a decade; humanitarian work to identify the remains of Argentine soldiers in the Falklands; dialogue to protect fish stocks; and most recently progress towards establishing a second airlink between the Islands and the continent. We are also supporting Argentina’s efforts to reduce corruption, the financing model for its infrastructure programme, and its ambition for OECD membership. We have secured Argentina’s support on global problems such as Modern Slavery and Anti-Microbial Resistance.  Bilateral trade is on the increase (up by 5.6% in 2017). DIT led the first Commercial Dialogue with Argentina this year, enabling us to discuss bilateral trading issues at the highest level. The former Foreign Secretary visited Buenos Aires in May this year, the Secretary of State for International Trade visited the G20 Trade Summit in September and the Prime Minister is due to attend the G20 Summit end of November.

The UK’s position on the sovereignty of the Falklands and the right of the Islanders to decide their own future remains unchanged. We are clear with Argentina that a key requirement of a better relationship with the UK is to see restrictions that hinder the economic development of the Falkland Islanders (namely in flights, shipping and hydrocarbons) removed.

Brazil. As the ninth largest economy in the world, and largest market for UK trade in Latin America, Brazil offers huge opportunities for UK companies. It is a key player on many of our foreign policy priorities including energy and climate change, development in Africa, and UN reform. UK relations with Brazil are good in many areas particularly on economic and trade issues (total trade in 2017 was £5.54bn)There was a major increase in UK engagement with Brazil at the start of the decade, which culminated in close and successful collaboration at the Rio Olympic Games. On some UK foreign policy priorities, e.g. OPCW, Brazil has not been the constructive international partner we would have hoped.

We continue to strengthen ties with Brazil to promote a range of UK interests and we have a number of formal bilateral dialogues in place (on Finance, Trade, Energy, Defence, Development, and Foreign Policy) to enhance cooperation.  We work closely with Brazil on energy and climate change issues, in the UN, multilaterally, and on modernising government and encouraging growth including the opening of their offshore pre-salt fields to international bidders. This also creates opportunities for UK companies. We support Brazil’s application for membership in the OECD.   We are investing heavily through the Prosperity Fund, International Climate Finance, and Newton Fund, which is opening new doors for UK. We will work with President-elect Bolsonaro and his team to promote our values and on multilateral, G20 and bilateral priorities to strengthen the relationship between our two countries.

Chile. The UK Government sees the current Pinera Administration as a like-minded partner both economically on free trade and free enterprise issues and politically as a supporter of the rules-based international system.  We have welcomed Chile’s robust support on the use of chemical weapons following the Salisbury incident. 

November 2018 marks the 200th Anniversary of the Chilean Navy, including the arrival of Admiral Lord Cochrane who helped found Chile’s Navy, and this contributed to freedom, democracy and independence there. Our defence engagement continues to be strong with ship visits, defence sales, training and equipment. We have a burgeoning relationship on cyber issues, where Chile could also be a leader in the region.

There are major business opportunities, particularly in transforming the mining sector, and new opportunities emerging in relation to Chile’s major lithium reserves. There is significant two-way investment potential. Chile also has ambitions to be a leading regional financial markets hub. It is also a leader on environmental, green growth (including green finance) and ocean issues. There are considerable infrastructure and other opportunities that align with the UK’s Industrial Strategy.

Colombia. Our longer-term aim is to move from a donor-based relationship to one of partnership. Colombia is the third biggest economy in South America with huge potential to grow as it moves out of conflict. It is a member of OECD and recently ratified a partnership agreement with NATO.  We want the relationship to be based on prosperity and shared values.

UK support to the peace process remains central; we are working with the new Government to understand its priorities, such as tackling illegal armed groups and organised crime, the highest levels of coca production since the 1990s, and the humanitarian impact of the Venezuela crisis.

The UK holds the pen for the peace process at the UN Security Council, at Colombia’s request. We have used our leadership to ensure the UN continues to play a critical role in maintaining cooperation between all parties. In 2016-17, the UK led work at the Security Council to establish two UN Special Political Missions to support negotiations and the FARC’s laying down of weapons. This was followed by a successor “Verification” mission set up in September 2017 at the request of the Colombian Government to support the future of the peace process. During October 2018, the UK led work to renew the mandate for the “Verification” Mission, which continues to bring vital international focus and technical assistance to the peace process.

The UK also supports peace through programme funds (see below), contributions to the UN Trust Fund (£19.2m), the EU Trust Fund (£1.3) and the OAS (£6.5m) from the Conflict Security and Stabilisation Fund since 2015. We have prioritised work on HRD’s, PSVI and Modern Slavery with support from the £1m human rights fund managed by our Embassy.

Peru. The UK has a growing commercial relationship with Peru.  Peru’s GDP stands at $215bn per annum and its growth rate of 4.9% per annum was second only in the region to Bolivia. Anglo American’s decision to invest £4bn into the Quellaveco copper mining project in Peru will create thousands of jobs and is the latest example of UK businesses’ growing appetite for the region, placing the UK as the largest foreign investor in Peru. During the former Foreign Secretary’s visit to Peru in May 2018, we formally established UK-Peru Infrastructure Task Force, following on from the Government-to-Government programme bringing UK companies in to support Lima’s preparations for the 2019 Pan-American/Para-Pan-American Games. The Task Force brings together UK and Peruvian government departments and agencies such as UKEF, with British and partner companies, to work together on improving Peru’s infrastructure. As well as major road and rail projects, the Task Force will seek to tackle opaque and complex procurement processes in order to drive down corruption.  During the same visit, we agreed to Peru’s request for a UK-Peru High-Level Political Dialogue in order to frequently exchange views on a range of bilateral (trade, defence and security), regional and international issues. The first meeting will take place in November 2018.

Venezuela should be among the list of priority bilateral relationships for the UK.  It has the world’s largest proven reserves of oil. It used to have one of the highest per-capita GDPs in the region. But Venezuela is now a failing state presenting the deepest man-made economic and humanitarian crisis in South American history, which represents an unprecedented challenge for the region. Our policy response includes a number of measures.  In November 2017, the EU unanimously agreed a sanctions regime. We imposed targeted measures on 18 senior individuals responsible for human rights abuses, and for undermining democracy and the rule of law. We will continue to support the EU sanctions regime and would consider fresh regimes in concert with our international partners. We continue to work closely with EU, regional and international partners and urge the Venezuelan government to engage in serious, credible negotiations with the opposition; to respect democratic institutions; to ensure free and fair elections; and to release all political prisoners. We call for respect for freedom of the media in Venezuela. We are fully behind the Lima Group of countries in their efforts to seek a regional solution to the crisis. On 25 October 2018, Sir Alan Duncan gave a speech on Venezuela at Chatham House, focusing on the political, economic and humanitarian crisis (see Annex 2).

Building mutual prosperity through Trade and Investment

South America is important to our efforts to diversify our trading relationships. We want to strengthen significantly the UK’s absolute and relative trade with the region over the next 5 years, increasing market share in exports from its current low base of 1% (behind Germany France and Spain), ODI and FDI.

Led by our ambassadors and HM Trade Commissioner, we are using tools like the PM’s Trade Envoys, our network of posts, and ministerial visits to unlock investment opportunities and export wins in areas of UK advantage. These include traditional areas like mining, defence and security, and oil and gas but also the creative economies, infrastructure project delivery, financial services, life sciences, renewable energy, food and drink and education – many of which link directly to the UK’s industrial strategy.  

The UK continues to champion free trade with our South American partners. We have been one of the strongest advocates of the ongoing negotiations to secure an EU-Mercosur FTA. As we move towards our departure from the European Union, we are seeking continuity for our existing trade agreements, including with Chile, Mexico and the Andean Countries.

We are also seeking new opportunities, which is why we are potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Chile, Mexico and Peru. CPTPP is a broad and deep trade agreement that contains a diverse range of countries spread across four continents. It represents over 13% of global GDP, around 500m people and £94bn of current trade. 

Trade and export promotion

Work is targeted to where the UK has a strong offer, in line with the industrial strategy, and where there is local demand. This includes a focus on Energy, Mining and Financial Services in three markets (Brazil, Chile and Colombia). As well as specialists in market, we also support trade missions, taking UK companies direct to the opportunity. This has recently included a Sports Economy Delegation, the largest ever DIT-led Trade Delegation to Peru, and leading 20 UK companies to a mining convention in Chile.

UK exporters can access support through UK Export Finance (UKEF), the UK’s Export Credit Agency. UKEF is active in Brazil, Uruguay, Chile, Peru and Colombia. UKEF has signed memoranda of understanding with both the Latin American Development Bank (CAF) and the Brazilian Development Bank (BNDES) to finance infrastructure projects through co-financing and co-investment mechanisms. According to HMRC, we saw an 11.6% year on year increase in UK goods exports to South America in 2017. This is the highest annual increase since 2011. DIT also supports investment into South America through a comprehensive Strategic Relationship Programme thereby ensuring that large UK employers are supported to win more business overseas.

The region is also an important source of investment. South American companies have demonstrated a growing interest in the UK due to its modern, innovative business environment and global connections. There are currently 241 Latin American companies with a presence in the UK, receiving DIT support, supporting 7,380 jobs and £ 4.1 bn in investment value.

While markets face significant barriers to adopting clean growth sectors (such as renewable energy, and low carbon vehicles) there is recognition that these markets could present big opportunities for the UK in the future. There is significant enthusiasm to engage with us across the region (especially Brazil, Colombia and Chile), in part driven by the UK’s strong decarbonisation story, the services offered here, the City of London’ reputation as a global leader in green finance, and TFL’s work on low carbon transport.

Programme support to policy

Policy programmes are a vital part of modern diplomacy - a vehicle through which we deliver foreign policy and national security outcomes.  The FCO delivers agile programmes which adapt to dynamic, uncertain and ambiguous operating environments where change is politically sensitive or contested, or where we are testing new approaches because more traditional efforts are insufficient or inappropriate.  This approach is particularly relevant in South America. Across the region, FCO-led policy programme funds help deliver HMG objectives. We have been able to draw on an increasing amount of programme funding to support our expanding ambition for our engagement to further UK values and UK interests.  Priority policy outcomes that programming funding is helping to deliver include:

• achieving the UN’s Sustainable Development Goals (SDGs) of promoting inclusive and sustainable economic growth and helps us achieve our global commitment to helping the world’s poorest;
• strengthening the UK’s absolute and relative trade with the region, as part of wider HMG effort to diversify our trading relationships;
• assisting regional efforts to tackle serious and organised crime which impacts both on the region and on the UK;
• helping the region respond to the challenges and opportunities of climate change; and,
• increasing support for our global campaigns on good governance; climate; violence against women; education for women and girls, human trafficking and the illegal wildlife Trade.

FCO policy programme funding is predominantly official development assistance (ODA) but we blend this with non-ODA to ensure we can respond to the multi-dimensional challenges the region faces and our interest areas.  Our policy programme funds help to advance prosperity, tackle security threats and promote and project our values. We recognise that a safer, more secure and more prosperous South America not only contributes to reducing poverty, but also strengthens economic opportunities for the rest of the world, including the UK.

The FCO oversees a programme portfolio.  This consists of funding from the two cross-Whitehall Funds (the Prosperity Fund (PF) and the Conflict Stability and Security Fund (CSSF)) and the FCO’s own small scale departmental policy programme.   Beyond this BEIS runs three funds that have a footprint in South America; the International Climate Finance (ICF); Newton; and Global Challenges Research Fund.

Our staff work across HMG to ensure programme funds are fully integrated to maximum impact and advance our foreign policy and wider national interests.  In Colombia, for example, where all the above programmes are active, CSSF support is creating links between the peace process, SOC and environmental work. Our PF programme is helping Colombia to maximise its infrastructure investments and escape the middle income trap.  While our own departmental policy programme is supporting human rights defenders.   In Brazil, all our ODA programmes are linked under a single brand (GREAT for Partnerships) to ensure that the overall ODA offer to Brazil is clear and coherent. 

Prosperity Fund

Under the cross Whitehall PF we deliver multi-year programmes in Brazil (£80m+) and Colombia (£30m+).  The Brazil PF bilateral programme supports Brazil’s economic modernisation through increased productivity by working across four strands (Trade; Energy; Green Finance; Future Cities). The Colombia PF bilateral programme supports economic development by unlocking opportunities and driving growth in the country’s post conflict and conflict-affected regions, working across three strands (institutional strengthening; infrastructure; and agriculture).  Both countries are also in scope of a number of Global PF programmes working in individual sectors (such as health; skills; infrastructure, anti-corruption) across multiple countries. 

The PF has already delivered successes. For example, the PF is helping Brazil align with OECD standards. In June 2018 OECD Secretary General Ángel Gurría described our project on transfer pricing as game-changing, as well as highlighting work on anti-corruption, modern slavery and the digital economy. The engagement has also strengthened the UK’s relationship with the OECD.  As the PF helps us to support and shape the reform agenda, this could also open up opportunities such as a Double Taxation Agreement (DTA). This will increase the potential for investment for both British companies in Brazil and Brazilian companies in the UK. In Colombia, PF assistance to improve Colombia’s capacity to manage sustainable construction projects also opened up the opportunity for UK infrastructure firm Exergy to secure a business win worth £13.5m.

The main benefits, however, in terms of poverty reduction as well as secondary benefits of increased business opportunities, including for UK companies, will come over the next four to ten years as the new multi-year programmes unlock obstacles to growth. 

Conflict Stability and Security Fund

Since 2015, we have run two programmes funded through the CSSF: one supporting the Colombian peace process and one tackling SOC in Peru and Colombia. As of end 17/18, we had spent in total over £33m across the two programmes, helping to sustain regional stability and security. This furthers UK interests by:

•                      Reducing the potential of the region to generate illicit economies and activities that inhibit regional development and directly harm the UK and its interests.
•                      Enhancing regional prosperity thereby expanding opportunities for UK engagement in commercial, diplomatic and cultural arenas.

In Colombia, CSSF first supported the negotiations that led to the final peace agreement. It is now helping the Government of Colombia (GoC) overcome early challenges in implementing the Peace Accords and start to build the conditions for long-term stability. For example, to help retain the confidence of ex-combatants in the peace process, we assisted the GoC quickly to recruit and deploy field workers to reintegration zones, to deliver early livelihoods projects before bigger reintegration projects began, and to strengthen its mechanisms to prevent attacks on ex-combatants and community leaders targeted by criminal groups.

Over three years, our Colombia (SOC) interventions have established HMG as a critical ally and has seen the most sensitive of requests extended to us. These include assistance to the specialist regional SOC units of the Prosecution Service to mainstream financial crime/asset recovery capacity in their work; revision of the functioning of the Prosecution Service’s seized asset fund and initial steps in improving coordination between the Judiciary and Prosecution Service in complex case management.

In Peru – the world’s second largest cocaine producer - CSSF has enabled us to base NCA and CPS experts who have constructed mentoring and training programmes that have started to imbed UK procedures and technology into police and prosecution organisations.  For example, the police have incorporated UK courses on forensics and CSI into their in-house training, establishing the conditions for sustainable change in policing practices and a corresponding impact on criminality.  We are starting to see the impact of our capacity building on operations, including the first two successful extraditions from the UK to Peru.

FCO Departmental Policy Programme

The FCO Departmental Policy Programme, launched in 2016, amalgamated all the FCO’s existing strategic and bilateral programmes into a single Fund with a unified bidding and governance process. This provides small scale funding to support the FCO’s wider diplomatic effort and aims to advance our foreign policy and National Security priorities. It facilitates progress against key themes that matter to the UK , such as human rights, democracy and the rules based international system, economic security and opportunity etc. It provides Posts with a quick and flexible response to in-year opportunities to promote UK values and UK interests. All of our Posts in South America have received a modest allocation from our departmental policy programme. Examples of impact include; assistance to human rights defenders in Colombia; and help to domestic violence victims’ protection in Peru.

International Climate Finance

Through BEIS ICF the UK has supported climate change related development, mainly through a number of multilateral funds that invest in high impact, innovative programmes, in countries with rapidly growing emissions, with the potential to inspire others to act and to help shift public and private finance towards clean growth. In doing so, they promote employment, reduce poverty and supporting cleaner economic growth. This has mainly focussed on support to decarbonise energy systems, and halt deforestation. This is now broadening to other sectors such as low carbon transport, energy efficiency and green finance.

South America is an increasing focus. One example of a new investment is the Sustainable Infrastructure Programme (SIP), managed by the Inter-American Development Bank. This is a £177m programme designed by the UK to support countries in the region (including Columbia, Peru and Brazil) to accelerate the implementation of their contributions towards the Paris Agreement by mobilising private sector investments into sustainable infrastructure.

Newton Fund and Global Challenges Research Fund

BEIS operate two major ODA research and innovation programmes in South America; the Newton Fund and the Global Challenges Research Fund.

The Newton Fund builds research and innovation partnerships with 17 active partner countries to support their economic development and social welfare, and to develop their research and innovation capacity for long-term sustainable growth. The active bilateral partnerships through the Newton Fund in South America are in Brazil (£12m per annum), Colombia (£5m per annum) and Peru (£4m per annum). As examples on ongoing work, the Newton Fund has supported programmes to enhance innovation capacity amongst Pacific Alliance countries collaboratively, and is currently operating a regional biodiversity research programme across Colombia, Peru, and Brazil. It has also funded post conflict and human rights social research across Colombia and Brazil.

The Global Challenges Research Fund (GCRF) harnesses the expertise of the UK’s world-leading researchers, focusing on: funding challenge-led disciplinary and interdisciplinary research; strengthening capability for research, innovation and knowledge exchange; and providing an agile response to emergencies where there is an urgent research or on-the-ground need. Research calls under GCRF are open internationally and awarded on the basis of excellence, therefore allocations to specific countries or regions cannot be forecast. South America is among the beneficiaries.Both the Newton Fund and Global Challenges Research Fund have supported climate monitoring, adaptation and mitigation orientated research and innovation programmes.

Conclusion

South America is a necessary and natural strategic partner for the UK after we leave the EU. We must not lose sight of the opportunities the region presents. It requires long-term, sustained investment in politics, trade and influence if we are to achieve our aims under Global Britain. It is a region where presence and consistency pay dividends, as our most successful companies in South America and some of our competitors have demonstrated. But capitalising on these opportunities would require additional resource, which would have to be weighed against non-South America priorities in the usual way.

With the rules-based international system and liberal democratic values under threat, we can work with the region to consolidate its trajectory towards greater free trade and stronger democracy against countervailing populist trends. We need to provide a compelling counter offer to other powers that are gaining ground in South America, including making clear that the Chinese model is not the only one available for developing partners. In a post-Brexit world, our increasing self-confidence, wealth and global presence will be vital to efforts to redress the balance against the growing international threats to our values and beliefs.

Annex 1: Ministerial visits to the region since June 2017

Annex 2: Chatham House Latin America Conference 25 October: Sir Alan Duncan speech on Venezuela

It is a pleasure for me to be here today to speak about Latin America, and an honour to be in such good company. The United Kingdom is expanding its outreach and activity in the region, and one good example is our evolving relationship with the Latin American Development Bank whose Secretary General, Victor Rico, here this morning.

The United Kingdom wants to be a close partner in the next stage of Latin America’s development. We have been impressed by economic success in countries like Chile, Mexico, Colombia and Peru, and in smaller economies like the Dominican Republic and Paraguay. Economic policies based on free trade and greater economic open-ness have contributed to steady growth and the rise of a growing middle class.

I am also delighted to be sharing a platform with Jorge Faurie, and would like to register here the United Kingdom’s strong support for President Macri’s reform agenda and economic stabilisation plan, and the determination of the Argentine authorities to manage current challenges to achieve long term economic stability. Over the last 2 years our relations with Argentina have improved dramatically, we want to keep it heading in that direction.

That’s the good news – but I want to focus my remarks today on a country that offers a striking contrast, that’s Venezuela. I will do so because it is a failing state presenting the deepest man-made economic and humanitarian crisis in modern Latin American history. Its negative impact, vividly illustrated by the exodus of more than two million people who have fled to other countries, represents an unprecedented challenge for the region. I want to take the time to ask how Venezuela got here, and what can be done about it.

We cannot talk about Venezuela without understanding the central role played by oil since the early 20th Century, I speak as a former oil trader myself. Venezuela was a founding member of OPEC. A publication in 1961 by Chatham House’s predecessor, The Royal Institute for International Affairs, noted that “Venezuela over the past quarter century has been one of the most dynamic economies in the world”. The 1960s and 1970s saw it enjoying relative political stability and one of the highest per-capita GDPs in the region.

But, it was also a period that saw Venezuela become increasingly dependent on oil, in a way that stunted the potential for development in other sectors of its economy. Even the country’s then Oil Minister, Juan Pablo Perez, referred to oil as the “devil’s excrement” citing the waste, corruption and debt so often associated with it. As successive governments became addicted to oil, and the price fluctuated, the 1980s and 1990s saw Venezuela lurch back and forth between boom and bust.

This was hardly surprising as oil came to account for nearly three quarters of Venezuela’s total export revenue at the same time as economic policy was mismanaged, and governments failed to deliver structural change. Once the oil price in 1999 hit pretty much $9 a barrel, its people, of course, were ready for change. Through this turbulent economic period the traditional two party system lost credibility. Hugo Chavez, as a populist “outsider” who challenged the status quo, seemed to offer something new.

To begin with, what he offered seemed to work. His initial policies could be characterised as relatively moderate and broadly orthodox, a mixed model not unfriendly towards foreign capital. He sought to increase ordinary non-oil incomes, to reduce the size of the public sector, and invest in capital projects. He introduced incentives to encourage private investment, and he used economic growth to reduce inequality through the better distribution of oil revenues. He was, of course, helped by a sharp increase in oil prices, to over $100 a barrel by mid-2008. So in his early years, the Venezuelan economy was in reasonable shape, with rising GDP, falling unemployment, and a stable fiscal deficit. UN figures suggest poverty levels in Venezuela halved between 1999 and 2012.

Unfortunately, the relatively positive statistics masked deeper structural problems that Chavez’s increasingly radical ideology, his hubristic “socialism of the 21st century”, was in fact making it far worse. Even in the ‘good times’, spending outstripped revenue, and between 2001 and 2011, Venezuela and the state oil company PDVSA issued nearly $50 billion of new debt at increasingly high interest rates. The inevitable then followed: fiscal imbalances led to devaluation which led to rising prices.

To control inflation, Chavez introduced exchange rate and price controls, over-valuing the Bolivar against the Dollar and reducing the competitiveness of non-oil exports. Greater political radicalisation, including the expropriation of foreign companies, began to scare away foreign investors and encourage the middle classes to invest elsewhere, or look for jobs outside Venezuela even while domestic consumption seemed to be booming.

By 2012, Chavez was running an economy that was volatile and unstable, with high inflation and an overvalued currency. It was ever more dependent on an oil industry whose output was falling despite an unusually long period of high global oil prices. It was inefficient and unsustainable. In short, Chavez had squandered the massive oil revenues that could have built lasting economic success.

Let’s be really clear about this: the economic meltdown was entirely self-inflicted. The rot that had begun under Chavez set in more deeply under the Maduro regime. PDVSA was destroyed by political meddling and the sacking of thousands of competent oil experts.

Mismanagement led to the halving of oil production as the price of oil fell. Hyperinflation set in as import controls and fixed exchange rates reduced the supply of goods. The government printed money to finance its deficits. The black market boomed and the rest of the economy collapsed.

Foreign exchange and price controls created huge economic imbalances, which in turn generated massive incentives for corruption, and illegal but lucrative activities within government circles. According to the Financial Times, the Venezuelan government received $1.0 trillion in windfall revenue from the oil price boom between 2003 and 2012, of which it is said $300 billion was stolen or misappropriated.

Unsustainable levels of debt forced the government in November 2017 to skip interest payments on two sovereign bonds, and that led to an accumulated default which has now reached over $6 billion. The bloated state sector has squeezed out what was left of the private sector. What remained of the domestic manufacturing and agricultural sectors has been destroyed or expropriated.

Although the Venezuelan government practises statistical deceit, like all authoritarian regimes keen to hide the negative impact of their policies, we know that exports have fallen by half since 2008. Debt has tripled. GDP has fallen by a third.

This economic decay has translated into deep misery for most Venezuelans. The purchasing power of anyone outside the privileged few who can manipulate price distortions and multiple exchange rates has been shattered by levels of hyperinflation not seen in Latin America since the 1980s.

The recorded social cost of this gross economic mismanagement is stark. By 2014, poverty rates were back to 1999 levels, and now, according to the UN, over four fifths of Venezuelans are on the poverty line. The poor are poorer, more exposed to disease, and more vulnerable to malnutrition than at any time since the 1990s.

From all classes of society, those who can, are leaving. Over 2.3 million Venezuelans have taken refuge abroad – 1.6 million since 2017 according to the International Organisation for Migration - with 5,000 a day crossing the bridge at just one border post, Cucuta in Colombia. This is one of the greatest migrant crises ever faced by Latin America. It is comparable in scale to what has happened in Yemen or Syria, and it is a tragic reversal of the generosity shown by Venezuela to refugees and migrants from elsewhere in Latin America during the last century.

In addition to doing damage in his own country, Maduro is also accused of allowing illegal armed groups and criminal gangs to take refuge in Venezuela. These include dissident FARC who have refused to take part in Colombia’s peace process, and also the ELN, another guerrilla group which is waging a brutal campaign of violence in vulnerable communities. He has also stoked tensions with reckless military incursions across the borders in Colombia and Guyana.

Maduro’s double crime is that his destruction of the economy has been followed by the systematic undermining of democracy. We now see increasing political repression under Maduro, as the regime seeks to ensure that its inner circle continues to enjoy exclusive access to slices of an ever-diminishing economic cake. To do so, others have to be shut out. He allows no room for genuine democracy, nor space for political challenge from a free opposition. We have seen the manipulation of election after election over the last two years, culminating in a Presidential election last May that few apart from the government itself considered free and fair.

We have also seen a systematic effort to bypass and browbeat the National Assembly. This was elected in 2015, in a vote that saw the first major electoral defeat of Chavismo. The political opposition secured a majority with 56% of the vote on a high turnout, in a clear sign that the Venezuelan public did not want to follow the regime down the ruinous path along which Maduro and his cronies wished to take them.

The opposition’s victory threatened the state-facilitated kleptocracy of the Maduro model. So he concocted an artificial Constituent Assembly, wholly lacking in democratic legitimacy, which was set up to do the regime’s bidding. And we saw a systematic effort to undermine or control what remained of Venezuela’s democratic institutions, including the judiciary, the national electoral authorities and local government. What is left is a corrupt, authoritarian regime presiding over a bankrupt economy.

We have recently been shocked by the death of opposition politician Fernando Alban, whilst detained by the Venezuelan Intelligence Service. Also by the unlawful detention of National Assembly deputy Juan Requesens.These, along with the recent brutal suppression of demonstrations in Venezuela, are symptoms of an increasingly intolerant government turning to repression to cling onto power.

It did not have to be like this. There are plenty of other middle income developing countries in the world, also dependent on oil or another single, dominant resource, which have continued to grow. Chile relies heavily on copper. Colombia depends substantially on oil, and in addition suffered devastating internal conflict for decades. Yet both have maintained growth and shown impressive results in social and economic development even through the recent economic downturn in Latin America. Looking further afield, the Gulf States have withstood the impact of lower oil prices since 2014, in no small part due to large financial reserves they built up during the good times.

In recent years, low interest rates in advanced economies have fuelled record levels of capital flows into emerging markets. Venezuela, with its ideologically-driven governments and mismanaged economy, has missed out entirely.

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A man-made catastrophe requires man-made solutions, and preferably ones which are originating in Venezuela. That would require a different attitude, and perhaps different people at the helm. Venezuela can return to sensible economic policies, with support from regional and international organisations like the Latin American Development Bank, the IMF, or the World Bank.

It can reverse the brain drain by once again attracting the wealth of talent available in the Venezuelan disapora. It can rescue PDVSA from its collapse by tapping into the expertise of an international oil and gas sector who are ready to work with a country with the world’s largest oil reserves and substantial gas deposits. The revival of the oil industry will be an essential element in any recovery, and I can imagine that British companies like Shell and BP, will want to be part of it.

It will also require political consensus, rather than polarisation; it will need transparent governance, not state-sponsored deceit; and a willingness to hear those who disagree with the government, rather than deciding to persecute them for dissent.

In November 2017, the EU unanimously agreed a sanctions regime. We have imposed targeted measures on 18 senior individuals responsible for human rights abuses, and for undermining democracy and the rule of law. We have always made it clear that these measures can be lifted as soon as the government of Venezuela puts these things right. We are continuing to work closely with EU, regional and international partners and urge the Venezuelan government to engage in serious, credible negotiations with the opposition; to respect democratic institutions; to ensure free and fair elections; and to release all political prisoners. We call for respect for freedom of the media and for journalists working in Venezuela.

In an unprecedented response, Venezuela’s regional neighbours have sought an ICC investigation into accusations of crimes against humanity. Citing over 8000 extrajudicial executions, 12,000 arbitrary arrests and the detention of 13,000 political prisoners.

Economic stabilisation and recovery will not happen overnight. It would require one of the biggest ever international bail-outs and a huge mobilisation of international resources. The UK is ready to play its part. Our commitment to Venezuela goes back a long way – to the birth of the Republic in the early 19th century, when we provided more material and diplomatic support than any other foreign power to the Great Liberator, Simon Bolivar. British companies have a long history of investing in Venezuela’s economic development, and remain committed to continuing this when conditions are right.

Of course we would prefer a Venezuelan solution, but this has become a regional crisis that will require a concerted regional and global response. The situation needs an intensification of outside pressure.

We are fully behind the Lima Group of countries in their efforts to seek a regional solution to the crisis.

We will continue to support the EU sanctions regime and indeed would consider fresh regimes in concert with our international partners. All options remain open.

This should include, I hope, a determination by Caribbean states which receive Petrocaribe supplied Venezuelan oil to resist inappropriate influence over their foreign policies. For the moment, we are committed to working with UN agencies, with the EU, and with Venezuela’s neighbours to help mitigate the humanitarian impact of the crisis overflowing the country’s borders into their neighbours.

I have painted a sombre picture today of one corner of the extraordinary region that we know as Latin America. I have done so, in part, to highlight the contrast with what is happening elsewhere.

We should celebrate, for example, the increasing resilience of Latin American democracy as seen by the successful democratic transfers of power this year in Colombia, Peru, Mexico, Chile, Paraguay, and, shortly, Brazil. We should praise the region’s growing commitment to free trade, which offers wonderful opportunities for the United Kingdom as we leave the EU. We must also recognise, despite some exceptions, Latin America’s steady adoption of policies that reflect the liberal, values-based concerns of an increasingly well-educated population – from intolerance of inequality and corruption, to support for LGBT rights and generosity towards migrants, of which Venezuelans fleeing their country are notable beneficiaries.

Since William Hague, as Foreign Secretary, launched the Canning agenda in 2010, the United Kingdom has sought to increase its investment, its attention and its focus on Latin America. This is a consistent policy, in a policy of outreach and partnership, which we shall continue to build after we have left the EU. As Minister for Europe and the Americas, that is a commitment I am happy to leave with you here today.

December 2018

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