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Brunswick Review The Resilience Issue

Nations & Partners

The UK Ambassador to Brazil tells Brunswick’s Robert Moran he is optimistic about future relations between the two countries.

Until 2016, Vijay Rangarajan was Europe Director in the UK Foreign & Commonwealth Office, responsible for work on the UK-EU referendum, associated negotiations, and wider EU positions, such as on energy, social security and foreign policy. In 2017, he was named Ambassador to Brazil, a country with over 200 million people and the world’s ninth largest economy.

Brazil is poised for dramatic changes. The victory last year of presidential candidate Jair Bolsonaro presents new challenges and opportunities for Brazil’s relationships with other nations, particularly with regard to the issues of trade. From the British Embassy offices in Brasília, the ambassador gives us his view on the outlook between the two countries and the implications for the rest of the world.

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How is the Brazilian economy evolving?
After experiencing the worst recession on record, with an accumulated GDP contraction of 7.2 percent in 2015-16, Brazil resumed a 1 percent growth in 2017 and 2018. Agriculture was the main source of growth between 2016 and 2017. Last year, however, services was the main sector.

The previous government made important reforms to improve the business environment and fiscal situation. These included relaxing the 1930s labor legislation (aimed at reducing rising unemployment), establishing stricter governance rules for state-owned firms, reducing directed credit and local content rules, and introducing a cap to government spending (limiting growth in real terms for 10 years, to be revised thereafter). We are optimistic about the Brazilian economy, and the clear direction to open up, and reform, which President Bolsonaro and Paulo Guedes have set. For 2019, analysts estimate a GDP growth between 2 percent and 2.4 percent.

When we last met in São Paulo, you were hosting a large conference that included many young Brazilian business leaders. What was your takeaway from that?
Optimism. The human potential of Brazil is enormous and a large, diverse, educated, young democracy is a great place to work, and a great place for the UK to work with. Business is keen to seize the opportunities of opening up the Brazilian economy that the new government has set.

As the UK Ambassador to Brazil, what are your top priorities?
Four key ones: We want to work with Brazil on the transition we all face to a lower carbon economy—from technology (e.g., biofuels or offshore wind) to investments (e.g., green finance). We are also working to strengthen our partnerships with Brazil on innovation and science (underpinned by the Newton fund and fantastic joint research). We work on security and foreign policy (e.g., supporting the Lima group on Venezuela, or work on cybersecurity), and in multilateral fora like the UN. And a lot of our effort goes on the important task of boosting our trade and investment, including supporting Brazil to join the OECD.

The human potential of Brazil is enormous and a large, diverse, educated, young democracy is a great place to work, and a great place for the UK to work with.

What are your thoughts on UK-Brazil trade?
We believe the two economies are very complementary. Nowadays, I would pinpoint the following sectors as our trade priorities: Energy (including Oil & Gas, Renewables and Marine), Life Sciences, Education and Financial Services. We hope to increase investments of the UK in Brazil, and vice versa.

What can UK-Brazil trade tell us about evolving global trade patterns?
The UK and Brazil are both services-based economies (around 70 percent of both countries’ GDP are services), but the bulk of trade between the countries is in the form of goods. The flow of services from the UK to Brazil has been increasing over recent years, which is reflective of global trade patterns. Services are becoming increasingly important. In that context, quotas and tariffs become less of an issue and regulations and standards become more important. We are working with Brazil to improve the regulatory environment and we cooperate in a number of sectors on best practices. Additionally, the WTO is starting new negotiations on issues such as e-commerce. Joining the OECD is a very important step.

What are the alternative scenarios for global trade and trade policy further out in the future?
Future trade will move away from goods-based trade to services, investment and more innovative areas. The rules-based international economic system will shape the global economy—and it is important to get the rules and institutions right. That is the reason why the reform of the WTO matters, and Brazil’s application to join the OECD too. The UK is in favor of free trade supported by the right rules and regulations. And obviously much of this will be digital: a very fruitful area for UK-Brazil joint work.

Can you tell us about partnerships that already exist between UK and Brazil?
The recent partnership that has been very active is our Infrastructure and Capital Markets Task Force. Through meetings and workshops, we are bringing together the private sector and government, both Brazilian and British, to discuss ways in which we can share best practice and highlight opportunities for cooperation and investment in both our markets. A session of the Task Force focused on capital market investments was held in Brasília last week. 

Do you have any examples of the results of these partnerships?
A good example is the engagement we have been doing through Prosperity Fund. Two core areas of this work are Green Finance and Future Cities. In Recife, an important city in northeast Brazil, we have signed an agreement with the local sanitation company to study and implement alternatives for water loss management in the water supply systems of Recife’s metropolitan area. In São Paulo, we are working on a project to improve traffic flows, improving the quality of life for poor communities, and reducing negative impacts on Brazil’s economic development in the city of São Paulo. Both projects will have the Prosperity Fund as funder and the World Bank as an implementer. But these partnerships span so many areas: from tax cooperation to intellectual property, cooperation to increase the efficiency of ports, to sharing expertise on energy challenges.

Robert Moran is a Brunswick Partner based in Washington, DC, and leads Brunswick Insight, the firm’s global public opinion, market research and analytics function.

Photograph: Courtesy of the United Kingdom Embassy, Brasilia

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