Hopes are high that Stephen Harper can help build Canada’s trade with Brazil, the world’s seventh-biggest economy, as he launches a Latin American tour this weekend.
Harper will meet with business and political leaders in the capital Brasilia and largest city Sao Paulo over two days before jetting off to Colombia followed by Costa Rica and Honduras.
Several cabinet ministers and Canadian business leaders will join Harper on his six-day swing.
The Prime Minister’s Office says it does not expect to launch free-trade talks with Brazil during this trip. But the visit is clearly meant to pave the way for such negotiations down the road.
“I don’t anticipate that there will be a formal launch of negotiations during this trip,” said Dimitri Soudas, Harper’s chief spokesman.
“What I am saying is Canada is obviously, under our government, has been extremely aggressive in pursuing these free-trade negotiations and these free-trade agreements, and it is something that we would be willing to look at with several countries, including Brazil.”
Under Harper, the Conservative government has sought to cement trade ties with Latin America and the Caribbean.
An April 2009 diplomatic cable from the U.S. embassy in Ottawa, published by WikiLeaks, gives some insight into the prime minister’s thought process on bolstering ties within the Americas.
According to the classified document, a chat with former Australian prime minister John Howard got Harper thinking that Canada could hold more sway with the United States if his country had strong relations with other countries in the region.
“Harper had long been favourably impressed by Australia’s ability to exert outsized influence with the U.S. in particular — and other powers as well — by emphasizing its relations in its own neighbourhood,” the cable says, referring to a conversation with a senior Foreign Affairs official.
“PM Harper hoped to gain similar benefits for Canada by increased attention to Latin America and the Caribbean.”
Harper stops in Brazil first. The largest economy in Latin America is running hot but showing signs of overheating.
President Dilma Rousseff’s government blames the United States for devaluing the U.S. dollar by keeping interest rates near zero. That has unleashed a flood of investment into emerging markets, such as Brazil, which has caused their currencies to rally. Essentially that means it costs more to buy things from Brazil — so shoppers are starting to look elsewhere for better bargains.
Brazil responded with measures to curb foreign investment. Rousseff’s government gave tax breaks to companies that make products in Brazil and slapped tougher controls on cheaper imports, most of which come from China.
It is against this economic backdrop that Harper will try to drum up business. The Conservative government dispatched International Trade Minister Ed Fast on a trade mission to Brazil in June with 19 Canadian companies, including Bombardier (TSX:BBD.B) and SNC-Lavalin.
Business is already good.
Some 400 Canadian companies already operate in Brazil, Canada’s 10th largest trading partner. Exports of Canadian merchandise totalled $2.6 billion in 2010 — up 60 per cent from the year before — and imports were $3.3 billion.
But Canada and Brazil do not have a free-trade agreement. Disputes over agriculture and aerospace during the 1990s and early 2000s hampered trade talks.
Relations soured in 1989 after Brazil sentenced two Canadians to 28 years in prison for kidnapping the owner of Brazil’s largest supermarket chain.The Canadian government irked Brazil with public pressure to try to win the release of Christine Lamont and David Spencer. They spent nine years behind bars before Brazil returned them to Canada under a prisoner-exchange program.
Much has changed since then. Last year, the countries agreed to co-operate on science, technology and innovation in a two-year deal worth $1.5 million.
The WikiLeaks cable says University of Calgary academic Annette Hester told officials at the U.S. embassy in Ottawa that the deal showed the “absurdity” of Canada’s Americas strategy and the “irrelevancy” of Canada to Latin America, since energy giant Petrobras alone is spending $174 billion on research and development through 2013.
After his stops in Brasilia and Sao Paulo, the prime minister will go to Colombia, where he is expected to talk up a free-trade deal that comes into force Aug. 15, mere days after his visit.
The two countries inked the agreement in November 2008 amid opposition from the New Democrats over Colombia’s dubious human-rights record.
It has been alleged the Colombian government is linked to violent paramilitary squads, and there have been a number of murders and kidnappings of union leaders and journalists over the years.
A deal on free trade between the United States and Colombia has been stalled for years by American lawmakers concerned about Colombia’s history of deadly violence against labour unions.
But the leaked WikiLeaks cable suggests Harper did not come easily to doing a deal with Colombia.
“It was a painful but deliberate choice for the prime minister,” another senior Foreign Affairs official told the U.S. embassy, according to the document.
The cable says Harper backed former president Alvaro Uribe “despite potential domestic political costs” because he “wished to support someone he viewed as courageous and trying to change his country for the better.”
Two-way trade between Canada and Colombia was nearly $1.4 billion last year. Canada’s merchandise exports to Colombia were worth about $644 million in 2010, while imports totalled $717 million.
From there, Harper will make stops on the Central American isthmus in Costa Rica and Honduras, where the PMO says he hopes to make headway on a new free-trade deal.
The Canadian government has been in free-trade talks for a decade with the so-called Central American Four, consisting of Honduras, El Salvador, Guatemala and Nicaragua.
Canada is closer to striking a deal with Honduras than any of the other countries. Officials from both countries held trade talks in Ottawa in December and again in the Honduran capital of Tegucigalpa in February.
Honduras would become the second Central American country with which Canada would have an agreement on free trade. There has been a deal in place with Costa Rica since 2002.