Latin America

I am grateful for this opportunity to contribute to the debate on behalf of the Liberal Democrats. I also join others in thanking the hon. Member for Waveney (Mr. Blizzard) on securing it. In the United Kingdom, poverty reduction and development issues tend to focus on Africa and parts of Asia, and sadly Latin America can get left out of the picture, but as we have been reminded today, it is home to many of the poorest people on the planet. The Department for International Development stated in March this year, in reply to a question from the hon. Member for Leicester, East (Keith Vaz):"““According to 2004 national poverty line data collected by the United Nations, 42.9 per cent.””—" approaching half—"““of the population of Latin America live in poverty and 18.6 per cent. live in extreme poverty. The levels of extreme poverty are higher among indigenous and afro-descendant people.””—[Official Report, 15 March 2006; Vol. 443, c. 2247W.]" I therefore share the concern of others that DFID's strategy in respect of deciding where to use its resources understates the needs and importance of Latin America, and I ask it to review that strategy. I am talking not about significant increases in monetary aid but essentially about the opportunity to share UK experience and knowledge, and especially the lessons that have been learned from the ways in which the EU accession countries have managed to develop, and from development and poverty reduction problems in Africa. The transfer of that experience, knowledge and expertise is key. Although I, along with others, understand and appreciate that a multilateral strategy is often ideal, if what we need to achieve cannot be accomplished through the mechanisms of the World Bank and the International Development Association it would be sad to have abandoned more direct bilateral approaches and the relationships that the UK has built up with the countries that are now attempting to deal with the poverty in their midst. There seem to be two general factors that discourage DFID from being more engaged in Latin America. One of them may be a matter of perception, but it is a high-risk geopolitical strategy in any case. Under the Monroe doctrine, the United States places Latin America within its sphere of influence and encourages European countries to play a lesser role. That may not particularly motivate the UK, but its lack of activity—the withdrawal of offices, the turn to an overwhelmingly multilateral approach—could easily be interpreted as acquiescence to the idea that Latin America is outside our sphere of influence, and that we have ceded to the US. May I suggest that, particularly in these times, that is a pretty dangerous approach? Latin America is a rising continent in its own right. Brazil has already been identified by Goldman Sachs and other investment banks as one of four countries that are particularly important for the future world economy. Whether or not one agrees with Chavez, Venezuela has oil resources that provide it with international clout. The Mercosur trading block covers a population of 250 million people and produces more than $1 trillion dollars a year in goods and services. These are large, major players who do not wish to be seen as an adjunct to north America and the United States. It is evident from any reading of statements and speeches across the continent that there is widespread suspicion of the USA and its intentions. President Bush's recent attempt to take forward a free trade area of the Americas looks like an uphill struggle, in part because the US is seen as having been responsible for past neo-liberal reforms that were unsuccessful, and as having an agenda that is primarily focused on the interests of the United States rather than poverty reduction in Latin America. Most Latin American Governments, by contrast, claim that they are seeking development strategies that combine the benefits of economic markets and social welfare. As such, they are following a model that is in many ways much closer to the European model—to the UK model, even—than to that of the USA. That argues for a much more direct kind of engagement and a recognition that there can be a very fruitful exchange between the European continent and Latin America, because, out of history, Latin America seems to be developing a similar approach to Europe's to many fundamental problems. Numerous articles have been written in recent weeks about Latin America's swerve to the left. Although rifts and friction exist between many Latin American countries over specific issues, and the colour and texture of Governments are extremely varied, there is now a broad consensus that the reforms of the 1990s—captured by the term ““neo-liberalism””—failed to deliver the promised wealth, and at best left the continent stagnant. Many people accept that reform was necessary, and that opening up to trade was necessary—indeed, urgently so—but the 1990s experience was so undermined by corruption, cronyism and a lack of willingness to tackle the problem of the vast numbers of people at the bottom of the social heap in dire poverty, that new answers are now being sought. Again, I believe that the UK should be playing a bigger role in that. The second reason for DFID's limited engagement results from the fact that most Latin American countries have a middle-income standing in development terms, but stark inequalities mean that many of the poorest people are effectively glossed over by that description. These are countries where great wealth and great poverty exist side by side. The challenge for most of Latin America is to find strategies for development that reach down to the destitute poor. Even in Brazil—one of the wealthiest countries in the region—the rural landless and the urban roofless are scarcely being touched by development programmes. Latin American countries—I accept that I am generalising—are trying to combine social welfare to tackle poverty with fiscal responsibility, typically in the form of tighter budgets, competitive currencies and trade surpluses. However, these countries remain heavily dependent on commodities and are short on the infrastructure and private investment that could underpin economic diversification. Surely, this is an area in which the UK could be more of a facilitator. The experiences of eastern Europe and India, in which the UK has been widely engaged, offer role models in respect of commercial legal frameworks and governance, which are key to encouraging private investment. I understand that DFID has had some engagement with initiatives such as microcredit and community banking schemes, but I am sure that it could work more effectively with international financial institutions—IFIs—such as the Inter-American Development Bank to facilitate a much wider expansion of such projects. The environment and climate change are bound up with this as well. In January 2006, the Brazilian Government released figures showing that deforestation of the Amazon rain forest was almost the worst on record, with more than 10,000 square miles having been cleared by ranchers, loggers and farmers. The problem affects all of us, but it cannot be tackled without strategies for the sustainable management of rain forests and sustainable development that will provide a decent living for the local population. I have seen good projects in the United States, particularly in the ancient forests of the Pacific north-west. The Pacific branch of ShoreBank and groups such as Ecotrust have worked with local people to develop effective sustainable alternatives. Surely DFID could do more to promote such schemes for the Amazon, including working with the European Union to provide markets for sustainable forest products. My view on drugs is somewhat different from that of the hon. Member for Waveney. If farmers are to move away from coca as an export crop for the drugs trade, there must be a long-term sustainable alternative. Our various programmes have never seriously taken on that challenge and used existing role models and examples to provide a long-term opportunity for people, whether in Latin America or places such as Afghanistan. At present, Latin America is enjoying a benign economic period. As others have said, demand for commodities, whether Brazil's iron ore, Peru's copper or Argentina's beef, has been fuelled by growth in India and China. The US continues to fuel Latin America's economy by providing employment for significant numbers of migrant workers, both legal and illegal. Remittances to Latin America increased last year by 17 per cent., to $54 billion. Foreign banks are taking a positive and benign attitude towards Latin America, largely because they are hunting for yield. They are courting major country players and have been willing to convert dollar denominated debt into local currency denominated debt at reasonable prices. My fear is that the optimism fuelled by these benign conditions is being squandered. For example, Brazil used the good times to reduce its long-term external debt from 40 per cent. of gross domestic product in 2002 to an expected 13.5 per cent. in 2006, but only a tiny fraction of real public spending increases—9 per cent. last year—was invested back in infrastructure such as roads, bridges and railways, which are the basis of future diversification. Even a minor global economic downturn would devastate the economies of Latin America, and if economic diversification and strategies to tackle poverty and inequality cannot be put in place while economic times are good, the chances of doing so will be nil when less good times arrive. Following up on the theme of urgency, the countries of Latin America need success in the Doha trade round. Brazil, like Russia, India and China, is probably sufficiently powerful and successful that it can cut its own deal with the major trading blocs, regardless of whether Doha is a success, but the remaining countries of Latin America fall into that dangerous middle ground: not poor enough to qualify for the open access permitted to the least developed, but not strong enough to be able to carve out a way alone. The failure to meet the 30 April deadline on the broad parameters for tariff and subsidy reductions in the Doha round raises a fear that the opportunity will be lost. Again, if a development trade round cannot be achieved when the global economic environment is generally positive, as it is today, there can be little hope of achieving it at all. In January, in response to a question from my hon. Friend the Member for Leeds, North-West (Greg Mulholland), DFID provided a detailed breakdown of bilateral funding to south and central America. Of course there are exceptions, but it is clear from those numbers that overall funding has been extremely volatile since 1997. It is hard not to conclude that programmes are constantly stopping and starting—the direction keeps changing—but we know that consistency and predictability matter in aid and development. Let me conclude with a plea to DFID. The countries of Latin America are in a period when, economically, much is going their way. Perhaps that will last for some time, but the reality is that the slightest economic downturn will generally cause problems and make life more difficult. The inequalities of society in most of those countries mean that people live in dire, impoverished conditions. It will be interesting to see how DFID intends to seize the moment, while the opportunity is good, permanently and sustainably to support improvements. I ask that Latin America not slip from the Department's priorities.