This week the attention of the world becomes transfixed on Brazil, and to the players and fans flocking to the country for the World Cup. With the tournament highlighting some of the barriers which prevent UK businesses from embracing trade with Brazil, a group of 18 parliamentarians and business leaders gathered on Wednesday morning to discuss how these barriers could be overcome.
John Carroll, Head of International at
Santander UK, set out the importance of international trade generally, explaining that companies in normal economic conditions are four times less likely to go into administration if they trade internationally – and ten times less likely in a recession. Despite this, he said, there are traditionally two key obstacles to international trade for businesses to overcome; knowledge to identify new markets and the ‘fear factor’ of how to operate abroad.
Assuming both football teams clear their respective group stages, England may stand to face Brazil in the quarter finals of the upcoming World Cup, noted
Maurício Molan, Chief Economist at Santander Brasil. However, unlike in football matches where there must be clear winners and losers, trade between the two nations could be mutually beneficial, he added.
Molan described the economic context that Brazil is currently in and the opportunities and challenges the country presents when it comes to international trade.
“Homework has to be done” on Brazil’s infrastructure particularly said Molan, and its trade liberalisation could also be improved, with the country still subject to some protectionist attitudes.
Despite this and some short term challenges like the management of Brazil’s inflation, Molan emphasised the huge potential Brazil holds for foreign business, being the seventh biggest consumption market in the world and the fourth biggest attractor of foreign investment.
“Don’t give up on Brazil” he urged. “While it can appear difficult to do business in Brazil, these difficulties can be mitigated with the right support.”
Responding to a question from
Robert Halfon, the Conservative MP for Harlowabout why infrastructure investment has remained so low at 2%, Molan stated that there were difficulties with administrative barriers meant progress was slow. The country could also do more to create public and private partnerships, something he saw as crucial.
Halfon asked whether the civil unrest in Brazil was likely to continue. Molan said the recent unrest had largely been due to the swift emergence of a middle class, accompanied by higher quality services and standards that the World Cup had introduced.
“We now have FIFA-standard stadiums, and so people are demanding FIFA-standard education and FIFA-standard transport.” He believed the Brazilian public are dissatisfied with the quality of public services and not Brazil’s democratic system of governance.
Conservative peer Baroness Hooperasked what progress there has been with the simplification of Brazil’s complex tax system. Molan said while advances on the subject remain challenging, positive progress had been made, such as relaxations on barriers to aid.
Labour MP and member of the Business, Innovation and Skills Committee, Ann McKechin, asked specifically about a scheme linking universities and Brazilian students, something Moran said it seemed the Brazilian government certainly maintained an appetite to continue.
Shadow Trade and Investment Minister Iain Murrayasked how the UK could increase the perceived importance of Brazil “opening its doors to imports”. Moran agreed it was something that needed improving, saying that holding a similar roundtable in Brazil to the one they were engaged in would be a great step.
The
vice-chairman of Parliament’s Brazil Group, Labour’s David Watts MP, asked about the emergence of the creative industries in Brazil, and Moran answered that this would be led by the creation and consolidation of the country’s middle class. There is already a demand for more sophisticated products in Brazil, he said, something demonstrated by Brazilian tourists spending a lot of money buying products when they are abroad.
Referencing the trade visit to Brazil she led in 2013,
Margot James MP, the PPS to the Minister of State for Trade and Investment, noted that the barriers to exports in Brazil were not insurmountable when there was a strong enough product. She asked Moran whether he saw any hope of a post-election government liberalisation of Brazil’s trade situation.
Moran said it may take more time for trade liberalisation to take place but he was optimistic regarding the country’s progress next year.
Ben Digby, Assistant Director at the CBI, and Robert Halfon both asked questions about how Brazil viewed the UK’s business. “Does it look to Asia and the EU first?” asked Halfon. “Is the UK rising up that scale?” Moran said he believed that Brazil typically tends to see the UK more as a provider of services rather than goods.
Agreeing that finding local partners is crucial,
Mairead O’Sullivan from The City UK, stressed the dissatisfaction that existed with the sluggish speed of change in Brazil, and raised the issue of corruption in Brazil.
James Brotherton, Chief Financial Officer at Tyman plcquestioned whether getting a local partner was really the panacea for businesses looking to do business with Brazil.
“We have found that it is easier to export once you are there than deal with the domestic market” he said. “In the end, we think the biggest thing you need in Brazil is patience.”
Two key issues that Brotherton said he had experienced were the length of the supply chains in Brazil and the quick changes in exchange rates, which had meant that its product could become more expensive on a month to month basis.