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Brazil proving a tough nut to crack

The Windsor Star, Canada

Brazil proving a tough nut to crack

By Mike Blanchfield and Andrew Mayeda, Canwest News Service

14 September 2009

William Dymond recalls the heady excitement of early 1997. Brazil’s president was bound for Ottawa, and Canada was pushing for a free-trade agreement with South America’s largest country.

Dymond, fresh from serving as Canada’s ambassador to Brazil two years earlier, had been placed on standby by the Liberal government of the day to lead the free-trade negotiations. Then, the free-trade talk simply died.

"It was killed by the Brazilians, not by us," says Dymond, now a senior executive fellow at the Centre for Trade Policy and Law in Ottawa.

More than a decade later, Canada is no closer to free trade with Brazil and, by all appearances, the current Conservative government has learned to live with that state of affairs.

That is curious, given that the Harper Conservatives have vigorously chased free-trade deals across virtually every corner of Latin America and the Caribbean. The country has free-trade deals with the likes of Colombia and Peru, but not Brazil, the largest country in the Southern Hemisphere, South America’s economic powerhouse and the globe’s 10th-largest economy.

Why not Brazil as a regional alternative to the U.S., which has been hobbled by the recession and is exhibiting a new wave of protectionism?

Brazil’s current government, headed by the charismatic President Luiz Inacio Lula da Silva, leans left, and flirts with the likes of Venezuela’s Hugo Chavez, but Dymond doesn’t see that as a factor in dissuading the Harper government.

For Dymond, there’s a simpler explanation: "The Brazilians haven’t done a free-trade deal with anybody."

International Trade Minister Stockwell Day just finished what was billed as a major trade mission to Brazil, and touted the opening of a new trade office in the Atlantic Ocean port city of Recife as the biggest deliverable.

Day clearly wanted more, but saw no point in pushing free trade.

"It’s something personally I’d like to see happen," Day told reporters at the end of his trip.

For now, he said, Canada was content to push for "enhanced economic opportunities."

In an interview with Canwest News Service, Day made clear Canada wants to deepen trade with a Brazil, with or without a trade agreement.

"Brazil was the first country that I visited when I got this portfolio. It’s the first country that I visited for a second time," said Day. "The very fact that we’ve opened another office there ... shows not just the interest but the opportunities that we have."

Canada and Brazil have endured stormy trade relations. The countries clashed through the late 1990s over whether each country was unfairly subsidizing its regional jet manufacturers, Bombard-ier Inc. and Embraer, respectively.

Canada was also openly vilified in 2001 for its ban on Brazilian beef, but both countries have put the major disputes behind them.

Brazil’s ambassador to Canada, Paulo Cordeiro de Andrade Pinto, has written that the two countries have become "increasingly dependent on each other for their prosperity."

In 2008, Canadian exports to Brazil surged more than 70 per cent to $2.6 billion, making Brazil Canada’s third biggest export destination in the Americas, behind NAFTA partners the U.S. and Mexico.

Last year, the two countries signed a framework agreement on science, technology and innovation co-operation. They followed that up this spring with a memorandum of understanding to deepen health-sector co-operation, including the fight against pandemics.

But shortly after Day’s visit, Lula introduced new legislation that would tighten his government’s grip on its oil reserves. Lula wants to create a government-run holding company that would manage oil-exploration projects and ensure the government gets its share.

Dymond says Brazil is reluctant to give up its levers of economic power.

"That’s what happens in a free-trade agreement. You lose a lot of the flexibility you have under the (World Trade Organization)," said Dymond.

"You turn left, and you turn right, and your officials say you can’t do that because our FTA prevents it."

Day also says there is "no question" Brazil sees itself as a competitor with Canada.

"But there are still some things we can do together, because, quite frankly, their extractive sector is still looking for some expertise that the Canadian industry is known for worldwide.

"They like our approach to corporate social responsibility. They know that with Canada they don’t have the same risk for investment that they might have maybe from other parts of the world," said Day. "The benefits can be mutual, so that’s how we’re pursuing it."