Margot James MP: Time for Britain to catch up and trade with Brazil

With George Osborne currently in Brazil emphasising the benefits of UK trade, chair of the APPG on Trade and Investment, Margot James, explains why it is worth Britain ‘playing catch up’ with countries already taking advantage of the market. The budget gave a big boost to trade finance. The amount of lending available from UK Export Finance (UKEF) doubled to £3bn, and the rate of interest charged on that lending was reduced by a third. UKEF are now able to guarantee finance at the lowest rate of interest permitted for any country under OECD rules. At last Britain has a competitive trade finance offer. Today the Chancellor has followed up the support for trade finance with an announcement of additional support for UKTI. On a visit to Brazil the Chancellor has committed more funding to UKTI operations in Latin America and Africa; and more funding for Lord Livingston’s programme of tailoring more UKTI support to medium sized companies. Last December I co-led a trade mission to Brazil with Dr Neil Bentley, Deputy Director of the CBI. The mission comprised twenty SMEs in sectors identified as priorities in Brazil: energy, defence, infrastructure and consumer goods. We came away inspired by the huge opportunities that exist in a country as big as the USA, but with our reality glasses on given the scale of the challenge. Access to Brazil is relatively straightforward for large companies. They have the resources to play the long game and meet the challenges. They will also be able to access the UKTI’s tailored support under the High Value Opportunities programme. It is undoubtedly the SMEs who need, and will receive, the new support announced today. There is significant political risk to doing business in Brazil. The process of authorizations, licenses and other regulatory requirements take longer than is the case in many other markets. Regulators are powerful, especially agencies responsible for the environment. The agencies are also under resourced; and this accounts for much of the delay accepted as part of doing business in Brazil. According to OECD research it takes an average of 119 days to start a company, and involves 13 procedures, versus an average for other OECD countries of 12 days and five procedures. The finance director of BP Brazil told us that a typical project, from conception to delivery, which takes nine months in the USA, will take at least two years in Brazil. Brazil is also at the more protectionist end of the trade spectrum. Tariffs on imported goods are high, and strict local interest laws oblige companies to recruit local staff, use local suppliers and transfer technical knowhow. Brazilian business leaders are fond of saying “Brazil is not for novices”. True, a company has to be serious, do its homework, visit the market (several times); ultimately the companies who do best set up shop in one of the major cities, although establishing a joint venture can be a useful stepping stone. The UK Consulates in Rio and Sao Paolo are very well connected and work well with UKTI on the ground. The additional money for UKTI in Latin America will certainly be well used in Brazil. UKTI and Foreign Office resources are also leveraging the private sector. Working with the British Chamber of Commerce in Brazil, large companies and Banks are encouraged to lead trade missions which enable British SMEs in their supply chain to visit Brazil. HSBC have supported the development of the Brazil British Business Centre in Sao Paolo, which draws together the embassy, UKTI and the British Council in a one stop shop for exporters. British companies are doing very well in Brazil, BG is the largest foreign investor in the oil and gas industry, and BP is a major player. At the end of last year JLR announced the opening of a new plant in Rio and Pearson announced the acquisition of the biggest English Language School in Brazil. The Brazilian government are starting to bring in the private sector via a series of ‘concessions’ (privatisations in all but name). There is a huge need for improved transport, education and health care services. Big companies are bidding for the right to invest in and manage airports, hospitals and other essential services for thirty year terms. There are huge opportunities for medium sized companies in the supply chain for these contracts. Britain is coming from behind in this market, as in many other growth markets of the world. We have to play catch up to competitor countries like Germany, Italy, Spain and players in the Far East. But we have advantages none the less. British companies have worldwide reputations in Brazil’s priority sectors; and Britain is well respected for product quality and business integrity. Margot James is MP for Stourbridge, Chair of the All Party Parliamentary Group on Trade & Investment, and PPS to Lord Livingston