Latin America

– in the House of Lords at 2:27 pm on 4th May 2006.

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Photo of Viscount Montgomery of Alamein Viscount Montgomery of Alamein Crossbench 2:27 pm, 4th May 2006

rose to call attention to recent developments in Latin America; and to move for Papers.

My Lords, we now move from domestic pensions to Latin America, which is quite a different subject. My thanks are due to the noble Lord, Lord Williamson of Horton, for allowing me a part of the Cross-Bench day for this debate. I made my maiden speech in 1976 and a valedictory tour in 1999 on the same subject, just prior to being reformed from this place. In a way, today's debate follows up the debate initiated this time last year by the noble Baroness, Lady Hooper. I pay tribute to her for pursuing the Latin American cause with great vigour over many years. I am therefore glad to be recycled here and to be in a position to support her on these issues. Like the noble Baroness, Lady Hooper, I have the honorary position of being a vice-president of Canning House—as indeed, is the noble Lord, Lord Brennan, who I hope will be here to speak later. By sheer coincidence, a debate on the same subject was initiated in the other place two days ago by Bob Blizzard, the Member for Waveney, who is among other things chairman of the All-Party Parliamentary British-Latin American Group.

The issue is thus very current, so I offer a brief reminder of what comprises Latin America. Latin America is a sort of shorthand for a number of countries. Among its 19 republics, Brazil speaks Portuguese, while from Mexico to Chile all the others speak Spanish. They all derive their culture from the European tradition, blended with that of indigenous peoples plus a mixture of African peoples in greater or lesser degree. The continent spans from the borders of the US to the fringes of Antarctica. The countries are all established democracies with regular presidential and parliamentary elections. The possible exception is Cuba, which is extremely stable, but has a president for life—like some of the people in this Chamber. However, they all operate very much in unison as a regional bloc in international fora, such as the United Nations and the Inter-Parliamentary Union.

This great continent of more than 500 million people includes two countries, Mexico in the north and Brazil in the south, that feature in the major economic league and are outreach members of the G8—an important area. Much has happened and continues to happen, with 12 republics holding elections between the middle of last year—when the debate initiated by the noble Baroness, Lady Hooper, took place—and the end of 2006. These have so far produced a swing to the left of centre and this trend would appear to be continuing. To my mind, what this really represents is a different approach to social and economic development and improved income distribution in a very dynamic continent where 40 per cent of the population live in poverty.

However, development does not only depend on whatever notion a newly elected president may conceive as the way forward, or on the volume of megaphone rhetoric from some presidents, which the international media love. There is also good historical evidence showing that the nationalisation of assets seldom brings economic benefits to the country, and certainly frightens off direct foreign investment—a vital ingredient for developing countries. In my experience, multinationals provide a great deal of employment and are very conscious of their environmental and social obligations in all the countries in which they operate.

What is really needed for development are the right structures. That means a good balance between the executive and the legislature, a properly paid and stable civil service, plus a completely independent and well established judiciary. In other words, what is essential are effective and wholly honest structures which can ensure distribution of the national wealth and avoid it being diverted by corruption. Unfortunately, that sort of structure has parts missing in some countries in Latin America where they are much needed. However, I am glad to say that Chile is a notable exception, where wealth has been created and distribution is taking place.

Historically, the USA has considered Latin America to be in its backyard but, since President Kennedy, it has really done little about it, despite the fact that only Mexico has more Spanish-speaking people than the US. Relations at present are at a particularly low watermark. I have a feeling that Latin Americans are not impressed by Britain's following the US into foreign conflicts in an attempt to impose democracy on countries that have never experienced it in their long histories and for which it is counter-cultural. It would be better to concentrate our efforts in more fertile areas such as Latin America, where we have been involved in a most constructive way since independence 200 years ago.

Let us consider what we are doing in this great region. Very little, I am sorry to say. Despite the recent successful visit of President Lula from Brazil, it hardly rates a passing mention in the recent government White Paper on foreign policy priorities. Last year, the noble Baroness, Lady Hooper, described our position as benign neglect, with which the noble Lord, Lord Triesman, understandably disagreed, but I fear that nothing much has changed. Four embassies have been closed and posts have been cut in size and status, which does not give much cause for enthusiasm. It is very depressing and not very good for morale. The Treasury under Gordon Brown appears to have removed the funds, and No. 10 appears to have removed the authority.

What can be done to reverse this trend? A great deal, in my view. The Foreign Office was always the smallest and most efficient department in Whitehall. It has been much reduced, if not emasculated. If Britain is to be an effective force in the world, the Foreign Office needs to be reinforced and re-empowered to its former glory. I would therefore like to make a few radical suggestions. I hope that the noble Lord, Lord Triesman, will accept that these are based on over 50 years' experience of promoting Britain in Latin America and Latin America in Britain in a spirit of good will, a great deal of passion and much enthusiasm.

My first suggestion relates to trade promotion. This is currently a mix between UKTI and the Foreign Office. This area of activity should be wholly centred in the Foreign Office where it once was—trade promotion should be moved from the DTI to the FCO. Overseas posts are where the knowledge of the market is located and where businessmen refer to when travelling, so they should be strengthened so that they can deliver and report back the opportunities to the home base.

My second suggestion concerns overseas aid. DfID is a huge department with a budget three times that of the Foreign Office. This should also be transferred to Foreign Office control, for precisely the same reasons as I gave for trade promotion. However, as Latin America receives little aid, this comment is really about Africa, where the direct funds often disappear or are frequently recycled elsewhere. In Latin America, the limited funds are mainly dispensed through international organisations and NGOs, with the result that a great deal is dissipated in administration and the UK gets little or no credit. In addition, the criteria for crisis support are very inflexible. I will give an example: the disasters in El Salvador and Guatemala caused by recent hurricanes and volcanic eruptions destroyed much of the agricultural production on which those countries' export trades depend. These are currently classified as middle-income countries, which allows for only limited support. But a disaster can instantly reduce a middle-income country to poverty level, which would not be reflected in international statistics for several years, by which time the country concerned might have recovered by its own initiative—they are a very hard-working lot.

Thirdly, at the risk of embarrassing the noble Lord, Lord Triesman, I ask myself why he is only a Parliamentary Under-Secretary. His travels and actions since his appointment indicate a serious interest, and this has been much appreciated in the region and by the Latin American diplomatic community in London. Historically, Latin America deserved a Minister of State and usually had one, but somehow that deteriorated after the retirement of the noble Baroness, Lady Symons, who is a shining example of when that model worked well and why it is so important to have the Minister of State for Latin America in this House. Another example was the late Lady Young, who, in her day, was also spectacular in that capacity. We had two very good examples of Ministers of State for the Foreign Office in this House working extremely well.

These three suggestions would put Latin America back in its rightful place as a continent with which we have so much in common; we are currently neglecting it in a most short-sighted way. There are a great number of very distinguished speakers in this debate, which is a very good thing. I am sure that they will cover all sorts of different aspects and I very much look forward to their contributions. I appreciate that the Minister may not agree with what I have suggested and that he is unlikely to be able to give any specific conclusions to my proposals. However, I hope that I have provided some food for thought and look forward to his comments. I beg to move for Papers.

Photo of Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean Labour 2:39 pm, 4th May 2006

My Lords, I thank the noble Viscount for initiating this debate today and for the excellent speech that he has just made in introducing our discussion. Between the noble Viscount's departure and subsequent return to this House, we have missed his valuable contributions to foreign policy debates on Latin America. His knowledge and his expertise—what he described as his passion—are born of a vital and vibrant interest in that part of the world, an interest that is grounded in extensive contacts and regular dialogue at a personal level. He is always interesting and provocative, and he did not disappoint us today.

For any country, economic health is vital to political stability and well-being. Most countries in Latin America have recognised the importance of trade and investment in securing that stability. So I shall concentrate my remarks today on the trading relationships with Latin America and ask the Minister how he perceives those relationships developing.

There is a variety of co-operation agreements between individual countries or groups of countries and the European Union. Most of them are based on three pillars: economic co-operation; institutionalised political dialogue; and the strengthening of trade relations. All those agreements, be they through Mercosur and the Andean Community, or with central America, are important, but perhaps I may ask the Minister first about the role of Latin America in the World Trade Organisation talks on the Doha development round.

When the EU Commissioner, Peter Mandelson, visited Argentina, Brazil and Chile at the end of March, he concentrated on trying to build an alliance between those countries and the European Union for WTO talks. Can the Minister update us on whether Mr Mandelson had any success, either in drawing Latin America's position as a whole closer to agreement with the European Union, in dealing with some of the evident bilateral problems—for example, disagreements over intellectual property between Brazil and Chile—or in addressing issues surrounding direct foreign investment elsewhere in the region?

Many international companies have a presence in the Argentinian market, for example. The UK is the sixth largest investor, with roughly 5 per cent of the total foreign direct investment. Moreover, more than 30 top UK companies have investments in Argentina. If these investors are to sustain their position, they need more certainty, but the attitude of the Argentinian Government is at best ambiguous. They know how desperately their country needs foreign direct investment, yet their president encouraged a blockade against Shell in February 2005 and several foreign investors have international arbitration claims outstanding.

That position appears to be very different from that which prevails in Brazil, where the UK is also a leading investor. In the past few years, we have seen British Gas in Sao Paolo, Glaxo in Rio and Pilkington in Sao Paolo, as well as the very welcome recent announcement from ICI of investment plans for up to $50 million. Brazil has made some real progress, under both the previous and current administrations. Does the Minister believe that this opening of its economy is the dominant economic driver in the region, or that the more restrictive and difficult investment climate in Argentina is more appealing to its Latin American neighbours? Unless these issues around foreign direct investment are resolved in the region, the impact on the WTO negotiations could be serious.

What is the Government's view of the role of Latin America in those discussions and the role of Brazil in championing developing countries? Is that role realistic in view of the fact that Brazil will shortly be the 10th largest economy in the world and not remotely comparable to some of the poorest countries in the world that it claims to represent in those talks? How does the position on intellectual property which Brazil has adopted with regard to the pharmaceutical industries really contribute to the battle against malaria, tuberculosis and AIDS in Africa?

The agreements between the EU and Chile and the EU and Mexico are to be welcomed. They cover variously trade, investment agreements and, importantly, rules on competition, intellectual property and dispute settlement. Do those agreements between the EU and individual countries offer a more realistic way forward than the pursuit of agreements between the EU and the Mercosur group, or between the EU and the Andean or central American groups?

On the brink of the fourth EU/LAC summit, which is due to take place in Vienna this month, will there be progress on the EU/Mercosur agreement, and will it be possible to open negotiations on association agreements with the Andean and central American groups? If such progress cannot be made, perhaps the time is now right to pursue what I might describe as the Chilean or Mexican route instead. In that context, I endorse one of the questions of the noble Viscount; that is, where and how is UK policy on trade and investment conducted?

Over my working lifetime, this issue has bobbed up with tedious regularity. Valiant attempts have been made by both Conservative and Labour governments to deal with the issues, but I am afraid that there is a bit of good, old-fashioned turf war, not just between Ministers—who, I am sorry to tell the Minister, are birds of passage after all—but far more tellingly between Whitehall officials. A permanent secretary who cedes ground by letting an important part of his department's portfolio go to another department is widely perceived to have let his department down. So the trade Minister now works primarily in the Foreign Office, but responds not only to the Foreign Secretary but to the Secretary of State at the DTI. Trade policy, however, is primarily conducted in the DTI, with input from the Foreign Office on broad economic issues and political impact. UK Trade & Investment, under its admirable new chief executive, Andrew Cahn, sits between the two departments and, in theory, responds to the trade Minister. I shall not even begin to deal with the position of the ECGD, which responds to the Chief Secretary of the Treasury.

All this may sound like an excellent example of joined-up government, but, in my experience, having different groups of civil servants working on the same issues but ultimately responding to different Secretaries of State is rarely a recipe for effective decision-taking, let alone operational efficiency. The more I have thought about this, the more I believe that the noble Viscount is right that trade and investment effort should be under one roof, with consultation being carried out as necessary. I am bound to say that I think that that roof is the FCO roof.

This issue is crucial in our relationship with Latin America, because the Latin American economies are moving. Brazil may be going slowly, but analysts say that its economy will overtake in size that of Mexico and Australia. Chile has become a beacon for economic and political stability. Its growth is 6 per cent this year, and opportunities for trade and investment in the public and private sectors are good. Mexico's trade and investment have grown at a steady rate. Public and private partnerships are offering real investment opportunities for British business. Venezuela should be another prime target. Our exports there shot up by some 25 per cent in 2005, and the opportunities in the oil and gas sector are self-evident.

The economic importance of these countries is growing. We need a clear focus on our trade and investment relationship with them. We must of course achieve that through the WTO and our European agreements, but, crucially, we must do it also through bilateral agreements, because we need to build the United Kingdom's trading links with these countries for the future.

Photo of Lord Walker of Worcester Lord Walker of Worcester Conservative 2:48 pm, 4th May 2006

My Lords, I was in another place for 31 years and I cannot remember following two speakers and agreeing with both on almost everything they said. On this occasion, I have that pleasure. I add my congratulations to the noble Viscount on instigating this debate. It is a joy to see him back and active in this House, and once again leading the activity on Latin America.

There has never been a time when British diplomacy needed to be more active in Latin America. The noble Baroness mentioned the emerging world trade round. This trade round is very different from anything we have previously seen. When China joined the WTO, everybody said that it would make an enormous difference, and they were right. Mercosur's coming together meant that its members had the power of collective negotiation if they wished to use it. We are seeing an enormous amount of diplomatic activity by China in Latin America and nowhere near enough by either this country or by Europe as a whole, which I regret.

China, due to its import policy, has transformed many Latin American economies over the past 18 months, and it is interesting to see how its diplomacy has followed. The president of China arrives in Argentina, expresses his great affection for it and his delight that he has been able to buy its products at prices which are good for its consumers. He says that he wants to go on buying its products—its food, minerals, oil and gas—and would be very happy to invest in Argentina as well. The reaction of the people of Argentina was, "What nice people the Chinese are. They are buying our goods, they are saving our economy and they want to continue being active partners with us". Leading Chinese figures have in the past six months been to virtually every Latin American country, saying how much they want to invest and purchase their goods, but also to discuss with them the world trade round.

I hope that there is a recognition both in the United States and in Europe that China is not alone in negotiating the world trade round. It is assembling enormous allies throughout the world. It is partnered with India on a considerable scale. Many of the Asian countries are following the Chinese on these trade negotiations. Many African and Latin American countries are now linking up with China on these trade negotiations. We might find that the United States gets a great surprise.

As Secretary of State for Trade and Industry, I had the privilege of leading the British delegation way back in the early 1970s to the Tokyo trade round. It was the first trade round where we had been part of the European Community. I quickly discovered the clout of the European Community and of the United States. The main negotiation was between the United States and Europe, with a few fragments then thrown to the rest of the world. That has been true of almost every trade negotiation since, but maybe not on this occasion.

When President Bush came to power, he said that his main ambition as president was to bring about a Free Trade Area of the Americas in his first term of office. He said that for sensible reasons. He knew Europe was expanding and would have greater clout in trade negotiations. He knew China was probably coming into the WTO and America's negotiating power would be weakened. If he could join up all the Americas into one trading group, obviously led by the United States, it would give him much more power in world trade negotiations. I am afraid that he has failed in this.

NAFTA was created, with Mexico, Canada and the United States as one group. As far as the rest of Latin America goes, if anything they are more hostile to the American viewpoint than they were years ago. They are more hostile because President Clinton, having succeeded in getting NAFTA with Mexico and Canada, then called all the presidents of Latin America to Washington. He said to them, "We are very much in favour of NAFTA, but we are not interested in all of you joining. The only one that we are interested in joining is our friends in Chile". Chile was rather pleased about this, but the rest of Latin America was rather dismayed when the president of the United States said that he did not want to negotiate with them. The negotiations with Chile were quite difficult. Congress had made enormous difficulties over NAFTA in the first place.

I am afraid that the United States is not going to be all that strong in this trade round, and nor is Europe unless we can get allies and have understandings. The noble Baroness quite rightly questioned the progress that Commissioner Mandelson has made. It is terribly important that Mercosur has a good relationship with the European Community.

I was in Argentina the week after Mercosur was created, with the then Argentine foreign minister, Mr Di Tella, a great friend of this country, who spent many years at Oxford when he had been kicked out by various military dictators in Argentina. I congratulated him on the creation of Mercosur. He said, "Peter, it is a miracle. I have created the equivalent of the European Community without a Commission". I had some desire to congratulate him. They do not have a Commission. That may mean that they do not collectively negotiate, but they will certainly discuss everything together. Our relationship with Mercosur in the next few months is crucial. If we do not establish good relationships and a good understanding of its negotiating position, the trade round will be in great difficulty. I even fear that if the trade round becomes too tough, because of the negotiating power of China and its many allies in Latin America, Africa and parts of Asia, then it might come to a point where the United States withdraws from the trade round. If that happened, the whole thing would collapse. That would be an enormous disaster for the whole world.

Latin America is also moved by the fact that it has a lot of primary products. We are moving from a period when the manufacturers, such as ourselves, had enormous power and the primary producers had none to a period when the primary producers have ever increasing power, finance and strength and the manufacturers less. The United Kingdom can play an important role in the development of those primary products. The development of Latin America's manufacturing base will also be important.

I still find it unbelievable that in this country we have an education system in which Spanish is neglected as a language. Here is a great part of north America, nearly the whole of Latin America and part of Europe all speaking Spanish, and there is hardly any Spanish teaching in our education system.

Both the noble Viscount and myself have been active in the chambers of commerce for many years. We are bored to distraction at constantly attending many committee meetings of chambers of commerce connected with Latin America, and many dinners and other occasions. However, those chambers of commerce need to be encouraged. I agree with the remarks made by the first two speakers in the debate about the importance of getting the Foreign Office firmly back in the seat. It is important that every encouragement is given to trade and industry in this country to seek out the markets of Latin America. Let us have a lot more active diplomacy in the next few months and a lot more recognition of the swaying power in the coming world trade round of Latin America as a whole. If that can be achieved, it will be to the benefit of Latin America and, I believe, to the benefit of this country.

Photo of Baroness Thomas of Walliswood Baroness Thomas of Walliswood Women, Cross-Portfolio and Non-Portfolio Responsibilities 2:57 pm, 4th May 2006

My Lords, for the second time in a week I wonder how I have the courage to intervene in a debate which has so far produced such expert speeches.

I thank the noble Viscount for giving us an opportunity to talk about this important subject. I can never remember whether we met in Peru 35 years ago or in Cuba somewhat more recently, but we have known each other for a very long time. More or less wherever one goes in Latin America, the noble Viscount has either just been there or is just about to arrive.

I recently revisited Peru, with the IPU, my first visit for more than 30 years. I was stunned once again by the size of the country, the wealth of its historical sites, the flowers, the landscapes, the climate zones and the people. In the late 1960s I was acutely aware of the poverty and of the geographical obstacles to good government. Power was in the hands of a white elite and the indigenous population was more or less ignored. In the intervening years Peru has suffered from the growth of the drugs trade, like other South American countries, and particularly from 20 years of conflict, particularly in the Andean zone, during which some 70,000 people, mostly Andean peasants, died. This was a conflict between Maoist terrorists called Sendero Luminoso—the leaders all with smart degrees from the Andean universities, more disgrace on them—and the army. It is difficult to decide which was the more violent and frightful in the way it carried out its business.

In 2001 a commission for truth and reconciliation was established. We met several of its members while we were over there. In two years the commission itself established the death toll and highlighted the need for restorative justice, reparation for victims and the re-creation of civil society. It has also pointed to the need for access to health services and to education for the whole of Peruvian society, not just for the wealthy, together with the restoration of human rights and the punishment of the guilty.

When we met the members of the commission, they were not as confident as one would have hoped that their recommendations were being heeded by politicians. No individual reparations have been made. The armed forces are partly protected against accusations of wrongdoing by the existence of a special military supreme court. On the other hand, the press is beginning to show up the military background of some current presidential candidates and progress is being made in education and health.

It is important to recognise that democratic elections for the presidency were taking place. As the noble Viscount reminded us, democratic elections have been taking place over the past year or so and will continue to do so. There is quite a broad spread now of something like proper democratic elections and proper democratic procedures. There are two people in Peru left in the ring—Alan Garcia, the left-wing leader of the only real political party in Peru, and Umala, the indigenous candidate of unknown qualities, to say the least. One could be a little ruder, but I do not want to abuse the privilege of this House. This is a great tribute to the re-establishment of a culture of good management of elections by Peruvian NGOs. I should like to say at this point what I have said before in private meetings with the Minister and with other Ministers. Wherever we went, the role of DfID in supporting the re-establishment of civil society was widely praised. Its disappearance is mourned. While I understand that we cannot give aid, I hope that we shall continue to give technical advice and assistance in such matters as teacher training and improving the way in which civil society works.

Much discussion is ongoing in academic circles and, as we heard from the noble Lord, Lord Walker, in other places as well, on the similarities or differences between the so-called new leaders of south America—Hugo Chavez in Venezuela, Umala in Peru, if he succeeds, Morales in Bolivia, even Lula in Brazil and Kirchner in Argentina. To my way of thinking their exact position in relation to the left, right, Cuba/United States—all that series of contrasts—is less important than how their undoubted populism will lead them to react to the economic realities of the time: high commodity prices, macroeconomic stability but persistent inequality within society.

I used to say when I lived in Peru that if I were a well educated Peruvian young woman instead of a well educated English young woman I would be on the left, even possibly a rather revolutionary left. No other approach seemed to me to be satisfactory given the problems that the country faced at that time. Now I say that one should redistribute the wealth that is coming from economic success into the poorer classes in Latin America, but make sure at the same time that someone is minding the money and managing the flow of cash so that it is not wasted or diverted into the wrong pockets or cut off by the foreign interests that own or manage much of the extraction which creates that wealth.

If Latin American populism can be described—as it has been—as a bizarre blend of the inclusion of the excluded, macroeconomic folly and political staying power, it is the macroeconomic folly that needs to go. I hope and believe that there may still be a chance, albeit an outside one, that the next Peruvian president can successfully persuade the current manager of Peru's finances to stay on. If that happens, it will be an excellent omen for the country's future.

I should like to mention one further item—the Chinese influence in South America. I shall do so very briefly. The Chinese are buying raw materials and selling back manufactured goods. What does that remind us of—the British Empire? In the same way, the value added came to us, not to the suppliers of the raw materials that we used. That is an economic danger of the influence of China over Latin American countries, particularly the ones which border the Pacific. I rather hope that the Peruvians, for example, will take decisions which will encourage and promote the refining of some of their minerals, thus creating greater added value and more jobs for the job-hungry populations on the coast.

Lots of good things are happening in Peru. Huge efforts are being made to head off a possible AIDS epidemic. Peruvian organisations are working hard to address some of the damage done by growing coca in Amazonia, to ensure fair election processes, and to carry education to the people who live in the Andes or healthcare into the slums. But if the macroeconomic bit does not work, so much of that could be lost.

Photo of Viscount Waverley Viscount Waverley Crossbench 3:05 pm, 4th May 2006

My Lords, I wish to make two quick points before I come to my principal remarks. The decree by Bolivia's President Morales to nationalise the petroleum and natural gas operations is a blow to western interests, including that of British Gas.

While sentiments of helping the poor are welcome if that is achieved with fiscal accountability—frankly, that would make a refreshing change to the situation elsewhere, where energy is the principal economic provider—the rule of commercial law must surely be respected. Will the Minister comment on that? Will he also say whether there is any suggestion that western interests did not cut a fair deal at the time of negotiation with the Bolivian Government for those assets? Does President Morales realise that there may be a freeze on foreign inward investment into his country?

Secondly, I listened carefully to the noble Viscount, Lord Montgomery, and his underlying remarks vis-à-vis the United States. The manner by which the United States is conducting its policies for a new world order—and much of the detail is admirable—might be creating long-term global alienation and would leave us worse off than before. That would then be harder to put right than a positive drift to an equitable world.

And so to Colombia. What happens in that country haunts us in the United Kingdom, or certainly should do. President Uribe's term will soon end. However, a ruling by the constitutional court is enabling him to throw his hat into the ring for a second time. He inherited a policy of ill-founded government land concessions for peace to Fuerzas Armadas Revolucionares de Colombia—FARC—which is the oldest and strongest guerrilla group in Colombia. It was a process of complete failure and was flawed from concept.

Colombians gave their vote to Uribe, recognising that the guerrillas had played a double game; there were negotiations with the Government on the one hand and continued military training, kidnappings and attacks on small villages on the other. Uribe was mandated to end this by using the full force of the military. There is now a more stable political environment, with subversion and large-scale kidnappings reduced and the destroying of small villages and the blocking of main roads eliminated; many rebels have been killed, hundreds are in gaol and thousands have rejoined society and are now playing their part.

FARC's leadership nevertheless remains intact. The opposition take this as indicative of Uribe's failure. The reality is far from that. The Plan Patriota had cornered FARC into the southern and most remote corner of Colombia. Recently however—flexing its muscles in the run-up to the presidential election of 28 May—it demonstrated its continued presence and capability elsewhere in the country.

The second largest terror group, Ejercito de Liberacion Nacional de Colombia—ELN—has also been somewhat cornered by fighting three fronts: against the Government, paramilitaries and FARC, for territory and positioning in the cocaine trade. This has resulted in ELN being forced to enter negotiations with Uribe's government. All to the good.

It is important for observers to understand the background. Colombian cocaine cartels in the worldwide narco-traffic were started by Pablo Escobar in the 1980s. This cancer has affected Colombian society at all levels, making the problem the engine of corruption and guerrilla violence. Colombia's most powerful cartel was formed after Escobar's death, with the unification of the guerrillas under the cartel of Medellin. The guerrillas offered protection to cocaine plantations and today have their own worldwide distribution network. Drug dealing and kidnapping are the basis of their finances. By the 1990s the guerrilla movement had shed its political and social ideology and solely adopted criminal activities.

Against that backdrop, the Uribe administration have used the military with positive results, but as a further weapon and after a long-standing US demand—a pillar of co-operation between the two countries—Uribe used extradition as a persuasive tool against terrorists and drug barons. However, success in this long, drawn-out war can come about only with the co-operation of drug consuming countries. Uribe has been having considerable difficulties with the international community, for whom human rights violations are paramount and who are led to believe that the guerrillas still have idealistic motivations. Influential NGOs and foreign media, in particular, have exacerbated the situation with an unpragmatic and sometimes unbalanced overview. To that list can, with regret, be added certain Members of this Parliament in the UK.

While some human rights cases do exist, they do so as a result of a war where civilians are used as a shield against the Colombian military forces. It is simply not plausible to condemn Colombian military forces in their entirety for those few cases, as in the same manner it is not just to condemn the entire US and UK military for occasional abuses in Iraq or elsewhere. FARC and other rebel organisations use the media machine to give Europeans a totally wrong image of this long conflict. I can tell the House that, for the first time in a very long time, Colombians can go about their day-to-day business, both in the principal cities and rural areas, knowing that a sense of security prevails.

And what of UK government policy? My understanding is that an approach of constructive support exists, while not ignoring issues that cause concern. A balance between the two would appear to be correct, believing that there is more to be gained by offering support and advice than by remonstrating without offering solutions. That said, Colombia principally needs understanding from countries such as the UK—an understanding that can be achieved only by making a realistic analysis of the situation, an analysis that should be made from firsthand knowledge, not the spin of intermediaries.

I would like to float a thought with the Minister. Would he support an Anglo-Colombian initiative from two universities—and I can think of one certainly, in Colombia, and so one from each country—to analyse and offer recommendations to end the violence and create an environment for peace? With that, you would have one of the most beautiful countries on Earth filled with people who can breathe freely.

In conclusion, Colombia needs first and foremost understanding, fair international trade for its products and, above all, fair treatment.

Photo of Lord Giddens Lord Giddens Labour 3:13 pm, 4th May 2006

My Lords, I, too, congratulate the noble Viscount on having initiated this debate. By that I mean a bit more than the ritual that one usually goes through—in my short time in your Lordships' House, this is the first time that I can recall on which there has been a debate on any aspect of Latin America. Given the importance of Latin America in the world community, this debate is only to be welcomed. As the noble Viscount said, Latin America is a big place and I will concentrate mainly on one small bit of it.

Recently there were two elections very close to one another. In one country to which reference has been made several times, Bolivia, Evo Morales was elected. By the way, Bolivia is the third poorest country in Latin America. In Chile, which along with Mexico is the richest country in Latin America in terms of GDP, President Michelle Bachelet was elected. I will say some things about Chile and its implications for the rest of Latin America.

Michelle Bachelet is Chile's first female president. In fact, she is the first female president in Latin America who was not married to a president before; so this is a notable breakthrough. I do not know whether any noble Lords heard President Bachelet's inaugural speech, which was quite charming. She said, "Who would have thought that someone like me—a woman; a mother of two children but separated from her partner; an agnostic—could have been elected in a country like Chile?". Indeed, who would have thought it? Chile is a male-dominated society, in which divorce was only legalised two years ago, and abortion is still illegal. One of President Bachelet's first acts was to introduce a 50:50 gender divide in her Cabinet and among the country's governors; that has not exactly happened in the UK.

President Bachelet will continue the policies of her predecessor Ricardo Lagos, in my view quite rightly so. President Lagos had a 70 per cent approval rating when he stepped down, and with very good reason. It was President Lagos, before he was President Lagos, who on television pointed his finger at General Pinochet and said, "You promised you would not stand again in 1989. Are we to have eight more years of torture? Eight more years of oppression? Eight more years of human rights violations?". Many people thought that Mr Lagos would disappear overnight. Fortunately, he did not, and President Lagos did a marvellous job of handling the transition from Chile's fractured past to its seemingly stable present.

Most noble Lords will know that there was a truth commission in Chile. Some 28,000 people who had been in prison, many of whom had been tortured, gave evidence at the truth commission. The result was a country kind of coming to terms with its past. Just before this debate, I was reading President Lagos's recent book, The 21st Century: A View from the South, where he says this nice thing: "no tomorrow without yesterday".

Chile, as at least one other noble Lord has mentioned, has had consistent growth rates of up near 7 per cent over the past few years. Inflation is low; and one must remember that inflation was 27 per cent in the early 1990s. What is particularly remarkable is the drop in the poverty rate. Poverty was at 38.5 per cent in 1990, and it has dropped to 18.8 per cent in 2004. Chile looks like a European country in that respect. That poverty rate is lower than that of Italy and is about the same as that of the UK.

Chile opened its markets, and that is the basis of its success. You cannot succeed in the modern world as a developing country if you do not embrace the wider world market. I do not say that one should embrace it in a na-ve fashion, because you must have the right institutions. But no country that has closed itself off from world markets has prospered. Only those countries that have successfully engaged with those markets have done well. Chile is often seen as a triumph of the so-called "Chicago boys", that is, free market philosophy, but it is not like that at all. Chile is now a social democratic country. President Lagos got a balance between an open economy and social policy. It is social policy that has improved the level of poverty; and it is social policy that has begun to establish the basis of a welfare state in Chile. Inward investment in Chile is much higher per head than it is in any other Latin American country.

What lessons can be learnt? There are four lessons. First, you must have growth if you are going to leverage people out of poverty. The only way that we know of getting many people out of poverty is economic growth in which the poor participate. They do not always participate, especially in the history of Latin America. Secondly, you must have fiscal discipline, and I therefore approve of what President Lula is doing in Brazil. I wrote an article for a Brazilian newspaper saying that, and I got a whole host of hostile e-mails from the left, saying that he must spend more. As with President Kirchner in Argentina, you need fiscal prudence if you are to invest in growth. In both cases, they have managed to pay off a significant amount of their IMF loans, and so have saved quite a lot of money per year.

The third lesson is the crucial importance of the empowerment of women. That is one of the main things holding Latin America back. There is a direct correlation between economic prosperity and the involvement of women in the labour force and in wider political systems across the world, whether in rich or poor countries. Chile is perhaps the first country where this will take effect in Latin America.

Fourthly, you must conquer the problem of the state. The difficulty of economic development in Latin America is not markets; it is that the state is often over-bureaucratic, corrupt and over-extended. One worries when one sees President Morales send in the troops to nationalise industries as he did yesterday. Unless you reform the state, and run things to the state when it is corrupt, you will not get anywhere.

An American vice-president who shall go nameless said, when he visited Latin America, that it,

"is on an irreversible trend towards more freedom and democracy—but that could change".

That is supposed to be a joke. He is also reputed to have said that he was surprised that people did not speak Latin down there, but that is probably apocryphal. Everyone is lobbing questions at the Minister and I will lob a couple, too. Do you believe that education can play a major role in promoting trade? I do, and we made a lot of effort at the LSE to expand our connections with Latin America. Secondly, are you prepared to spend more money on it?

Photo of Baroness Hooper Baroness Hooper Conservative 3:22 pm, 4th May 2006

My Lords, my thanks also go to the noble Viscount, not only for his kind personal remarks but also for his splendid introduction. It is great to see him back on the red Benches. He still waved the flag, or flags, for the countries of Latin America during his gap period. Like him, I have spoken in numerous debates on Latin America, and one hates to be repetitious, even when many of the facts bear repetition. I fully support his concerns about the Foreign Office's restructuring and resources, as well as those raised by the noble Baroness, Lady Symons. I add, for the umpteenth time, that our cultural, historic and trading links with the region are of great value and importance and are well worth preserving.

The Government's changed priorities and focus on the Far East and Middle East may be understandable, but we are missing a trick. It is interesting that China, our new great focus for trade and investment, is not missing it. The noble Baroness, Lady Thomas, has already referred to this. While we are pulling out of government-supported schemes, and the CBI is faithfully backing the Government's new trade priorities, China is moving in with investment as well as trade, and the political links that flow from the visits of the president of China and other senior government figures.

First, Latin American countries are very much a part of the global village. Only this morning there was a reference on the radio to Latin American troops in Afghanistan. They also serve in Iraq, Cyprus and other parts of the world, under the blue helmets of the United Nations. Distinguished lawyers from Latin America function as judges and arbitrators in global institutions, and many individuals from the 19 countries of the region play valuable roles in the WTO, the World Bank and the IMF. As has been said, regional organisations such as NAFTA, Mercosur, and even the Andean community with its population of 130 million, have a significant impact on the world stage.

Secondly, the region is rich in resources, as has already been said. My noble friend Lord Walker has already referred to agriculture and other primary products. Oil and gas have high visibility at the moment because of oil prices and the question marks over supplies from the Middle East and Russia, even before the new Bolivian president hit the headlines more recently. However, there are other valuable commodities and resources—chemicals, precious metals, and, above all, a resource of ever-increasing importance in our global world: water.

After Canada, Venezuela has the second largest resources of sweet water in the world. Even little Paraguay exports water in bulk carriers to the Gulf. The Amazon River is known to many. It drains one-third of south America and is 10 times bigger than the next biggest river in the world, with all that that means for communications, fish supplies and irrigation. Iguac"u Falls, measuring one and a half miles across, is one of the widest and most beautiful waterfalls in the world. As well as being a tourist attraction, it is a source of energy and water. I trust that our policies will ensure that those countries preserve and conserve the very precious commodity of water which is so much lacked in other parts of the world. I trust your Lordships will agree that all of those points, as well as all that has been said by other noble Lords, illustrate that not only Latin America as a region but the individual countries in their own right, is a truly global player.

Thirdly, democracy in Latin America, a subject which has already been touched on, is working and evolving, perhaps differently from other parts of the world. Recent events in Bolivia, for example, followed a proper constitutional process. Just over a year ago, when President Mesa was forced to resign and his next in line, the president of the Senate, Senator Vaca Diez, was also unable to take up the post, President Eduardo Rodriguez, president of the Supreme Court, took over as interim president. He presided over the country for the period leading to elections, which took place at the proper time and with international observers and produced a conclusive result. That is very good news.

If democracy is producing leaders who are more representative of the indigenous people and who seek to distribute more evenly the wealth that exists, we should all welcome it. In that context, the British branch of the Inter-Parliamentary Union (IPU) is playing a very full part in establishing good parliamentary relations between Latin American countries and ourselves. I was fortunate to go on a visit to central America. The noble Baroness, Lady Thomas, recently went to Peru. We are due to have a visit from Venezuelan parliamentarians shortly. Colombian parliamentarians were here late last year. That is all good news. The All-Party Group on Latin America, to which the noble Viscount referred, is also doing a terrific job.

I am delighted that President Chavez of Venezuela will visit London again in the near future. I hope that President Morales of Bolivia will also be invited, especially in view of British interests in oil and gas industries, which we hope will survive the current scenario. Mention has already been made of the very successful visit of President Lula. I should also like to point to the recent visit of President Fernandez of the Dominican Republic. It is one of the smallest Latin America countries, but on that visit many new business relationships and commercial opportunities were forged. So there is and has been plenty of action and activity.

There is also much more to be said, for example, about educational links, the downsizing of British Council operations, the reduction in Chevening scholarships, environmental issues and DfID's role not just in the closure of the Peru project but in all its work in central America. As other noble Lords have said, a bright spot in all this is the enthusiasm and interest of Ministers such as the noble Lord, Lord Triesman, from whom we will be hearing, and his colleague at DfID, Gareth Thomas.

I finish by saying that I had always hoped that the United Kingdom, because of its special relationship which the noble Viscount outlined at the outset, should be a bridge between Europe and Latin America. I hope that the Minister will be able to reassure us that together with Spain and Portugal we shall continue to build that bridge with all the enthusiasm and resources we can muster.

Photo of Lord Thomas of Swynnerton Lord Thomas of Swynnerton Crossbench 3:30 pm, 4th May 2006

My Lords, the House of Lords has changed a good deal recently, but there is one activity that has not changed: the dedication of my noble kinsman Lord Montgomery of Alamein in sponsoring debates on Latin America. These debates have been a landmark throughout a generation. It is true that during the unfortunate interregnum when my noble kinsman Lord Montgomery was not here with us, for reasons that I have forgotten, the noble Baroness, Lady Hooper, kept the flag flying admirably.

I have been taking part in my noble kinsman's debates for about a quarter of a century. What has happened in those 25 years? First, it is worth emphasising an obvious point—obvious points are often not noticed: that Latin America continues to be a continent where inter-state wars rarely occur. That is a remarkable difference from all other continents, Europe included. Perhaps that is why the media, which is interested in catastrophe more than benign developments, does not take much of an interest in Latin America.

Secondly, most of the civil wars that stained activity in Latin America a generation or so ago have ended. It is now over 40 years since the late Lord Harlech commented to President Kennedy in relation to the civil wars in central America, "Well, I don't see why they shouldn't have their own Wars of the Roses". Most Latin American countries have established peaceable settlements of one kind or another. I was very interested in what the noble Baroness, Lady Thomas of Walliswood, said about Peru and also in the impressive remarks made by my noble friend Lord Waverley about Colombia.

Many of the wars in central America were stoked by Cuba, but since the end of the Cold War Castro has had more to deal with at home and so there have been no such activities. It is worth while mentioning those civil wars of Latin America because they were immensely destructive. They brought no contribution of any positive nature to the countries concerned and ruined a generation of progressive people. With the exception of Colombia it is probably true to say that civil wars are not presently under way, which is a great change, although Colombia is still a great tragedy, as the murder last week of the sister of ex-President Gaviria for unknown reasons, but surely political ones, reminds us.

Latin America is after all a continent with fairly good interrelations between the peoples who make up the states and nations concerned; for example, Mexico. Mexico is a country where in addition to the mixed and Spanish sections of the population there are about 50 peoples speaking mutually unintelligible languages. That does not mean that they are going to go to war with each other: the Maya are not going to attack the Mixtecs. Perhaps it would be a good thing for the European Union to send out a study mission composed of Basques, Irishmen, Serbs and Flemings to discover the secret of tranquillity in Oaxaca.

The main development of the last generation, as the noble Baroness, Lady Hooper, mentioned, has been the development of democracy almost everywhere. My noble kinsman did not touch upon this as deeply as he might have done, but all Latin American countries unfortunately have their democracies geared towards a strong executive president, as France and the United States do, and not to the parliamentary system that the mother country—Spain—and we have. Perhaps that is something that the Inter-Parliamentary Union could investigate, if there is any chance of constitutional change in any of those countries.

Democracy occasionally throws up leaders with whom we are uneasy. Chavez is one and Morales is another. Humala may be another, and who knows what will happen in Mexico with Lopez Obrador. But that is the way of democracies: some leaders emerge who do not play the game in the way that it used to be played.

The democratic changes are especially impressive in Mexico. In the past, there has been a great number of major changes in that country—the conquest, independence from Spain and the revolution—that were characterised by colossal death rolls. But the present series of changes has not been marked by them. There are three strong candidates contesting the presidency on 6 July, and one of them will emerge as a fairly elected president of Mexico, whatever happens to him afterwards. What a change that is from the old days of the so-called "alchemy" when the election was always rigged to return a candidate from the ruling party, the PRI. In the past, if one ventured to suggest that there might be a fair election in Mexico, many intelligent Mexicans would say, "But my dear boy, if we had a fair election here it would be won by a priest, a singer or a bullfighter".

I have a moment in which I can mention Cuba. Cuba still suffers under the autocratic communism set up by Castro nearly 50 years ago. Its government shows no capacity or interest in making a plan for that beautiful country and those enchanting people to have a clear, free future. When Castro dies, there will undoubtedly be difficult moments. I pray that the changes that will then come will be allowed to evolve from within Cuba, rather than be imposed from without by, for example, the United States, whose mistakes in the remote past—as it now seems—before 1959, were largely responsible for the emergence of Castro in the first place.

Photo of Lord Howarth of Newport Lord Howarth of Newport Labour 3:39 pm, 4th May 2006

My Lords, it is a privilege to follow the noble Lord, Lord Thomas, whose depth of historical knowledge of Latin America is unparalleled. I add my thanks and congratulations to the noble Viscount, Lord Montgomery, for providing us with the opportunity for this debate. He spoke with all the authority of a lifetime's work and engagement with Latin America.

I add my voice to those that have argued that it is essential that the United Kingdom remains fully engaged with Latin America—diplomatically in terms of power politics and economically—and continues to make the contribution that we can to environmental and social progress in Latin America.

We have seen the closure of some embassies, notwithstanding the fact that the Foreign Office provides remarkable value for money. The British Council has been engaged in some retrenchment and DfID is reviewing its regional assistance programme. DfID categorises nearly all the states of Latin America as middle-income countries but that bland terminology ignores the extreme inequality that persists in Latin America. The corollary of extreme inequality is extreme poverty. Earlier this week, Bob Blizzard who admirably chairs the All-Party Parliamentary British-Latin American Group, of which I have the privilege to be an officer, told the other place in a debate that 57 million people in Latin America live on less than $1 a day and 132 million people live on less than $2 a day. NGOs, including British-based ones, do remarkable work in assisting social progress but I would contend that the Government cannot avert their gaze, not least with the commitments that they have rightly made to the millennium development goals.

In truth, Latin America needs not so much cash help as technical assistance to enable its countries to play their part and thrive in a global, knowledge-based economy. Because of the population balance, Latin America is a young continent, so there are important opportunities for educational links with our colleges and universities. The noble Lord, Lord Giddens, alluded to this.

The growth of the Latin American economies has been and is impressive. As has been said, this is important in a whole variety of ways, not least because of their role as commodity providers. There is impressive growth in many countries and, of course, we have recently become vividly aware of the economic performance, potential and power of Brazil. It was deeply pleasing to hear the speech that President Lula made at the Mansion House and to hear the response of the City of London to what he proposed.

While there is impressive growth in many Latin American countries, it has not yet led to discernible poverty reduction in all too many of them. It is in our interests as well as theirs to play our part in developing relations, including trade. It is also in our interests to encourage and help the countries of Latin America to achieve environmental sustainability.

Equally, it is in our self-interest to play a very constructive part in relation to the problem of drugs. When I was, until a year ago, a Member of Parliament for Newport, I was painfully aware of the activities of yardie gangs who, having saturated the markets in Bristol and Birmingham, turned their attention to Newport. About three years ago, I had the opportunity to visit Key West, which is the base of operations for the combined United States and United Kingdom international and inter-agency drive to interdict drugs traffic. The intelligence-led operations are of great sophistication and are a model of collaboration, but they were grievously under-resourced and, indeed, became more so when resources had to be diverted to Iraq. I hope that the Minister will be able to say that there is a determination to continue to invest what resources we can in this extraordinarily important work of ensuring that the drugs that emanate from Latin America and transit across the Caribbean are not able to proceed further in our direction.

I hear that SOCA is to withdraw drugs liaison officers from Peru. If that is the case, I believe that it will be an error of judgment. Crop eradication in Colombia has recently been almost matched by extensive planting. There is increased production in Peru, Ecuador and Bolivia; there is processing in Argentina and in many countries in south America. Between 1981 and 2001, the United States spent £8.57 billion on international narcotics control, mostly in Latin America, yet estimated production in south America during that period rose from 150 tonnes to 870 tonnes and the price halved. We now see US budgets for that purpose falling, the war on drugs apparently being lost and the will to fight it attenuating. We have just heard that Mexico has decriminalised personal drugs use, a policy that will no doubt add to the difficulty of the relationship between illegal Latin American immigrants in the US and others in that country.

Are we to give up? We could of course go down the same route of decriminalisation as the Portuguese have done—as far as I know, the end of the world has not occurred in Portugal—but if that is not to be our policy, we must renew our work. That is extraordinarily important for our own communities.

As the noble Lord, Lord Thomas, told us, the progress of democracy in Latin America has been remarkable, in contrast, sadly, to what has been seen in Africa. Although I would not wish us to abandon Africa, should we not also, however, be backing success in Latin America? Twenty years ago and more, the governments of Latin America were all too often authoritarian regimes. They failed to deliver the promises of reform that they made when they came to power. There were civil wars, military coups and border conflicts. In Colombia there was the drugs cartel and, effectively, two armed governments facing each other. Then there was the debt crisis and the terrible fall in living standards that followed. The turnaround has been extraordinary. We have seen revived democracy in Uruguay and Chile, and, as the noble Lord, Lord Giddens, told us, against the historical and cultural background of Chile the election of President Bachelet is a remarkable event.

There is democracy now in countries previously without that tradition: Paraguay, Bolivia and many of the countries of central America. Changes of government have been handled peacefully. Mexico has moved from being a one-party state to a multi-party democracy. But democracy in Latin America still needs support. It takes time and intelligent effort to develop democracy. We should offer our experience in helping states to develop their administrative capacity, improve accountability in their institutions of representative government, including political parties, and ensure that governance is good and the judiciary incorrupt. Deepened democracy will make possible sustained and equitable growth and fiscal stability will help to relieve endemic poverty.

We, in particular, need to be there. Unfortunately, the Americans are unpopular in the region, as President Bush recently found in Argentina. There are bitter memories of United States intervention in Guatemala, Nicaragua and El Salvador. I believe, although I would not expect the Minister to comment, that there is a poor quality of analysis by the State Department. It is curious that they allow themselves to be so nettled by President Chavez. We can take a cooler and more pragmatic view. As the noble Lord, Lord Walker, reminded us, China is highly energetic in the region. Britain, with and through the European Union, must remain fully committed in Latin America, for ethical, commercial and strategic reasons. Of course it is a problem to spread ourselves everywhere but it would be a huge missed opportunity if we neglected Latin America.

Photo of Lord Luke Lord Luke Deputy Chief Whip, Whips, Shadow Minister (Culture, Media and Sport (Also In Defence & Wales Teams), Culture, Media & Sport, Shadow Minister, Defence, Shadow Minister, Wales 3:48 pm, 4th May 2006

My Lords, I, too, congratulate the noble Viscount on securing this debate. However, I am very sorry that he referred to the area as Latin America, as I believe that one reason we in this country focus so seldom on that part of the world is that we use that all-embracing and rather misleading term and the term "the Americas", which is even more so. I always prefer to refer to the USA, Canada and Mexico when talking about north America, and when talking about points south I prefer to refer to central America and south America, because the focus thus becomes much more closely aligned to what one is talking about.

South and central America together make one of the most important developing regions of the world, one that after a somewhat chequered history is starting to stumble to its feet, with increasing political stability working hand in hand with growing economies. We saw the flexing of some of its muscle during the Cancun trade round. Overall, as this debate has shown, this region of the world is very much on the up, although, admittedly, not without difficulties—some of them not unconnected with Left-leaning governments.

The country on which I would like concentrate my comments is Argentina. I knew it well between 1955, when I witnessed the removal of a particularly corrupt and oppressive dictatorship, and 1971. I have followed with great interest the fluctuating fortunes of Argentina ever since. During the debate of my noble friend Lady Hooper last year, I commented that Argentina,

"always seems to be able to pull out of its difficulties".—[Hansard, 26/5/05; col. 634.]

It is interesting to compare her situation now to that of last year. Then there had been a massive restructuring of Argentina's debt, creditors had to accept a cut in principal, a lengthening of maturity and a reduction in payment of interest. As we all know, this followed an economic fall from grace in 2002, when Argentina went from a country widely held up as a model of successful free market reform to one that defaulted on its public debt of some $155 billion.

However, during the past three years there has been an annual growth in the economy at an average of roughly 9 per cent, reaching 9.2 per cent in 2005—the fastest rate for 13 years, with forecasts for this year expecting that growth to continue. January's figures show that it was the 38th consecutive month of constructive growth, with industrial activity and tax collection percentages rising and unemployment figures starting to decline. The start of this year has also witnessed President Kirchner paying off in full the IMF loan of some $12.5 billion agreed in 2003.

With no further defaults since 2002, investors in Argentina's debt have started to receive benefits from the GDP warrant scheme, which last year decoupled warrants from the bonds issued, enabling the warrants to be traded independently on the secondary market. These warrants mean that in any year when the economy grows faster than expected, creditors will receive 5 per cent of the difference between the size of GDP in that year and that predicted by the prospectus.

It sounds a convincing catalogue of progress. However, as usual, a degree of uncertainty hovers not far behind and there are increasing concerns regarding the control of inflation. The president has opted to keep growth going at all costs rather than having to raise real interest rates or to allow the currency to appreciate to damp down inflation. Instead, he has sought "voluntary" price freezes from retailers in the hope that they will keep inflationary expectations in check while he tightens fiscal policy. Consumer prices rose by some 12.3 per cent last year, causing unrest—naturally—in labour unions whose disruptive demands could, as one commentator put it,

"throw a spanner into the President's strategy".

An unprecedented measure was announced in March in an attempt to address inflationary pressures—a near-total ban on beef exports, with the aim of flooding the national market for six months and making beef more affordable to ordinary Argentines. Naturally, meat industry observers fear that the export market will be badly damaged and that prices in the politically sensitive home market will, after initial falls, start to climb inexorably as farmers switch to alternative crops—quite apart from the eventual effect on the balance of payments.

Can the Minister update the House on the plight of the isolated communities in the mountains of Salta, Jujuy and Formosa, where an estimated 3, 000 to 6,000 people have been affected by flooding and landslides in the past few months? What resources have Her Majesty's Government provided to help food and medical supplies to reach these cut-off communities where there is a high level of need?

I could not make a speech about Argentina without mentioning the Falkland Islands. In 1990, eight years after the Falklands conflict, diplomatic relations between the UK and Argentina were restored. There is now a sovereignty umbrella arrangement whereby both countries can respect each other's position on sovereignty while allowing them to resolve common interests such as fisheries and mineral deposits. Indeed, there have been very recent tensions over fishing rights, and Argentina recently impounded a British trawler in a dispute over squid-fishing. It is believed that squid is being used as a sovereignty tool over the Falklands. Can the Minister explain what has happened, how the situation has been resolved—if it has been—and whether it was simply yet another example of sabre-rattling for home consumption to show how macho the president is?

I am very fond of Argentina and wish it well on its road to recovery. It is a part of the world where we need to support and encourage good governance, democracy and the rule of law. Argentina has enormous advantages, and is a very attractive and varied country that stretches from the freezing and windy Tierra del Fuego—I have been there, so I know how windy it is—to the tropical forests of the north. I strongly recommend it to your Lordships if they are thinking of paying it a visit.

Finally, I shall make one small point about the new president of Chile, to whom noble Lords have referred. I remind your Lordships that there was a very feisty lady in the 19th century called Madame Lynch, who, as president of Paraguay, conducted a war against Brazil, Argentina and, I think, Bolivia, all at the same time, and lost.

Photo of Lord Brennan Lord Brennan Labour 3:56 pm, 4th May 2006

My Lords, the Latin American world is undergoing a process that involves politics, poverty and economic advance, each one a tension with the others, to which we should pay great attention. The International Monetary Fund reviewed the Latin American economy last week, and the general picture is that it is doing better than expected in making political progress and economic advances and in reducing poverty, as well as in making progress in employment and developing macroeconomic policies and the like. But, with that promising conclusion, the IMF issued a very strict warning which I propose to develop as follows.

Such promising economic progress in most countries is sustained by high commodity prices and a surge in demand. It is very dangerous indeed for the Latin American continent to build its economic future on that base. But when we look at politics, poverty and economics in Latin America, as I will now do with that warning in mind, what do we find? There is this logic: the nation's national resources equal the nation's wealth, which equals the means of reducing the nation's poverty, which equals the need to nationalise. It is the logic of leaders who have been elected in a number of South American countries in the recent past, and we must recognise it whether we agree with it or not. In 1938, Mexico nationalised its energy industry, which now enjoys a quasi-constitutional position in the life of that country. Thus recognising the realities, let us take Bolivia as an example.

Bolivia has the second highest gas reserves in South America, and is the poorest country in South America by a long way. In 2004, in a national referendum, 95 per cent of Bolivians voted for the nationalisation of their energy resources. In 2005, a hydrocarbons law upped the return on royalties and tax to 50 per cent. Last Monday, nationalisation was imposed by government decree. That is not progress carried out by those indifferent to the national will, but by people responding to it—at least, in terms of nationalising resources. Few of us would know that in many South American constitutions the natural resources of the country in question are regarded as belonging to that nation and inalienable in that ownership. So, realistically, we should accept that in a country such as Bolivia these changes are the result of popular forces.

In pursuing nationalisation, Bolivia, Ecuador and other countries seek a return on their own resources—the quid pro quo of the nation in relation to the investor. Ecuador imposed a 50 per cent windfall tax last month, while Venezuela has renegotiated all of its energy contracts with foreign investors. We know what happened in Bolivia. Whether we like it or not, the Latin American world is changing. During that change, is it not important for both the nation and the investment community to keep a sense of balance? Yesterday in the Financial Times, the editorial comment on Bolivia said quite plainly that,

"there is nothing intrinsically wrong in trying to maximise tax and royalties" for your country. On the other hand, when we think of the political leaders of South America, we ought perhaps to remember Adlai Stevenson, who said:

"Patriotism is not short, frenzied outbursts of emotion but the tranquil and steady dedication of a lifetime".

Political change may at times be dramatic, but thereafter it has to be considered and prudent, and will sometimes take a long time.

So, what are the prospects if the balance is to be kept in South America? The Morales victory is only the second occasion in several hundred years when an indigenous Indian became the president of a country in Latin America, the first being Benito Juárez. That is an astonishing rarity of success from what was the majority of the population. In Bolivia, this indigenous leader—faced with the national will which I have described—is selling Brazil 50 per cent of its needs in gas, which provides one-third of Bolivia's tax returns. There is no doubt that there will be a solution.

I have looked at the decree of last Monday. It is only three pages long and has nine short articles. One would have thought that it was drafted with flexibility in mind, as negotiations start now in the 180 days which have been given to investors to renegotiate. For Brazil, Lula has responded with prudence and care, so there are good prospects.

However, the net result of all this is that the poor of Latin America have spoken and their leaders have responded with passion, which we should meet with patience. We do so through the present Minister, my noble friend Lord Triesman, of whom I ask nothing save a promise that he continues to give the same level of intellectual enthusiasm, commitment and friendship toward Latin America that he has shown since taking office. His efforts will be matched throughout by those of the noble Viscount, Lord Montgomery, whose persistence is outdone only by his persuasion and utter determination that we will never forget Latin America. We should not, as its nations' destinies are linked with ours and we should look to it more than we do.

Photo of Lord Rea Lord Rea Labour 4:04 pm, 4th May 2006

My Lords, the noble Viscount, Lord Montgomery, has chosen an exciting time to discuss Latin America. He has also managed to bring what may be only a short burst of Latin American weather with him, which is rather nice. My credentials for joining the discussion are modest. I am only an emergency Spanish speaker, but I have over the years made five journeys to Latin America and visited 10 countries, including an IPU visit to Cuba.

My chief lasting impression of Latin America is of the stoical, poverty stricken but dignified and colourfully dressed indigenous people of the Andean region. Since the Spanish conquest in the 16th century, they have been treated as second-class citizens even where they form the majority of the population. There is still a persistent socio-economic hierarchy, with a small minority of direct descendants of the Conquistadores at the top—although their influence is diminishing—followed by "mestizos" of varying degrees of ethnic mix, with the fully indigenous people at the bottom. That is of course an oversimplification, but the parallel with South Africa and other settler-dominated countries is clear.

However, as almost all noble Lords have said, the political power structure is changing. In the past decade or so, government by military coup, which was the norm, has been replaced by government through the ballot box, although attempted coups have continued—the habit dies hard. However, so far, the change to more stable democratically-elected governments has not brought about much improvement in the lives of the less well off, and disillusion about democracy was until recently widespread.

Great inequality of wealth has persisted, although the region as a whole—as many noble Lords have said—is doing well economically, with oil and commodity prices at a high level. Small wonder then that Left-leaning governments with indigenous leaders and radical pro-poor policies—including re-nationalisation of energy sources—are increasingly being elected. When President Morales of Bolivia surprised the world three days ago by sending the army to take control of the gas industry, he was actually carrying out the programme on which he was elected by 55 per cent of voters, and, as my noble friend Lord Brennan pointed out, quite a lot of the other 45 per cent of voters were also in favour of this action. In fact, this was not an outright expropriation; the Bolivian Government are acquiring only a 51 per cent share in the industry and will pay for this—though the price has yet to be determined by negotiation over the next 180 days.

The surprise in Latin America is that the Left-wing governments of Venezuela and Bolivia have, so far at least, not been overthrown by coups or other methods organised by the CIA as has occurred repeatedly in the past, when any government a shade Left-of-centre were elected. In fact, an attempted coup did take place in Caracas in 2002, but was a signal failure because the army and a large number of the people remained loyal to President Chavez—even though he is accused of being a populist demagogue. There have been many events in the past half century, perhaps as many as 40, in which a Left-of-centre government have been overthrown in Latin America; the best known being Chile and Nicaragua.

There are of course more subtle ways of destabilising and eventually toppling Left-leaning governments who may be unpopular with certain powers in North America, such as economic squeezing. President Lula of Brazil lost some of his popularity because the financial strictures required by the international financial institutions caused economic hardship and prevented him carrying out some of the poverty reduction programmes that he and his party had intended. However, in a delicate balancing act, he succeeded in allowing many of these programmes to go ahead—a few, I am glad to say, have indirect assistance from DfID. President Lula retains popular support.

I hope that my noble friend will have time to outline the nature of development assistance that we are still providing to alleviate poverty in Latin America. He knows that, although direct bilateral aid has been withdrawn because of the middle-income status of Latin American countries, there is still extreme poverty in most of them, as Bob Blizzard pointed on Monday in Westminster Hall. Some excellent work, funded by DfID, had to be curtailed after the decision to concentrate aid on countries classified as poor. I do not need to go further on this matter; other noble Lords have discussed it.

The enormous advantage for the new wave of Left-wing regimes is that the leading nation among them, Venezuela, has vast oil wealth. It is heavy oil, which is more expensive to refine, but with world oil prices set high, that problem is less important. This enables Chavez to assist and encourage like-minded governments and presidential candidates such as Ollana Humala of Peru. This was the cause of a bad-tempered spat between thee two countries, resulting in the withdrawal of the Peruvian ambassador from Caracas. Chavez says a lot, as we have heard, and he does not mince his words, particularly about President Bush or even our Prime Minister, whom he has called a "pawn of imperialism" after the Prime Minister rather patronisingly said in another place that Venezuela should "abide by the rules of the international community", although he had not broken any. As has been mentioned, Chavez has developed a close relationship with Cuba and supplies it with subsidised oil. In return, Cuba is sending thousands of doctors to help set up and run health clinics in villages and barrios in Venezuela which previously had none. Cuba trains a surplus of doctors. In this respect, Cuba is rather like Scotland, which for many years exported doctors, plus engineers and whisky, while Cuba exports doctors, plus cigars and rum.

In the past few days, a new trade agreement has been signed between Cuba, Bolivia and Venezuela. It is known as ALBA—which is Spanish for "dawn"—Alternativo por las Bolivianos. This is being promoted as a socialist alternative to the Washington-backed Free Trade Area of the Americas. It contains clauses covering such matters as working towards the elimination of illiteracy and the expansion of employment.

I see no reason why British firms should not maintain or increase their investment in the new Left-leaning governments of Latin America. It is badly needed by the countries concerned. The terms offered may result in a reduced share of profits for investing countries when compared with prevailing or former high rates, but I am sure that fair profit margins will still be negotiable Almost every country in Latin America has a positive trade balance with the UK, so British exports should be welcome, whichever department of state promotes them. There are many British products of high quality for which we have historically built up a good reputation in Latin America. In particular, there is a huge need for expertise and training in a range of scientific, medical and other academic skills. I suggest that we are in a better position to provide them than China. I am sure that my noble friend will comment on this area.

I had intended to say a few words about the illegal drugs trade, but I see that my time is up. The matter has in any case been covered fairly fully by other noble Lords.

Photo of Lord Roper Lord Roper Liberal Democrat 4:14 pm, 4th May 2006

My Lords, I congratulate the noble Viscount on having persuaded the Convenor to include this debate in our proceedings and thank him for his helpful introductory speech. As the two previous speakers said, the debate is topical in view of the troubling events of this week. Latin America has probably had more column inches devoted to it in the British press than for a considerable time.

This remarkable debate has as usual shown the range and depth of knowledge in this House. I am rather embarrassed by my relative lack of expertise compared with those who have spoken. I am a relative neophyte. My personal interest in, and knowledge of, Latin America was very much enhanced by participation in an IPU visit to Uruguay and Argentina at the end of last year. I agree with what the noble Baroness, Lady Hooper, said about the importance of the IPU and with the suggestions made about how the links with the IPU might perhaps be developed as methods of assisting democracy.

Events in Bolivia this week have shown that of the two largest foreign companies producing natural gas in Bolivia one is Brazilian and the other is Spanish. The focus of the political and economic relations of Latin American countries is no longer overwhelmingly with the United States, but increasingly with other Latin American countries, with Spain—the foreign direct investment of which is growing enormously in many of the countries—and, as was said by the noble Lord, Lord Walker, with the developing role of China.

The higher world prices for oil, metals and other commodities have been enormously advantageous to Latin America in recent years. Whereas five years ago the region had an overall deficit in overseas trade of $44 billion, last year it had a surplus of $37 billion. That swing in the region's overseas trade and the prices earned for its exports have given those rather significant growth figures already referred to in the cases of Chile, Argentina and a number of other countries. I was able to see that when I was in Argentina and Uruguay.

The sad thing is that in spite of this significant increase in GDP in recent years, there is still little progress in tackling the acute poverty and inequality, which continue to be widely considered as the major problems facing the countries of the continent. The possible exception is Chile—I very much agree with the remarks of the noble Lord, Lord Giddens—where social policy has been built on to a liberal economy. Indeed, the liberal economy now means an effective society with the introduction of the recent social policies.

Over the past 15 to 20 years Latin America has seen in almost every country deep economic reforms, following fairly rigorous neo-liberal policies, sometimes introduced without very much attention to their implications. This can be seen in particular by the privatisation of utilities, leading to investment by European and American companies in many places. Unfortunately, as Professor Ricardo Ffrench-Davis, the senior adviser to the Economic Commission for Latin America and the Caribbean, reports in his recent book:

"Although these reforms have made some progress possible, their impacts on growth and equity have also brought disillusionment".

In spite of the recent economic growth, average real wages in 2005 were lower than in 1980, taking Latin America as a whole. The number living in poverty, according to some calculations, was higher. Attempts to reduce fiscal deficits have meant reduced spending on roads and physical expenditure and on health and education. As a number of noble Lords have said, some of the recent swing to the left in elections in Latin America has no doubt been influenced by these trends.

Another disappointment has been the slow and sluggish development of the institutions of regional integration, referred to by the noble Lord, Lord Walker. The creation of Mercosur in 1991 was something of which much was expected as a method of integrating the countries and also as a useful partner for the European Union. It was intended to provide for the southern cone a basis for economic and political union comparable to that of the EU.

I have been puzzled by this for some time, so when I was in Montevideo last year I visited the headquarters. I discovered that in spite of the aspirations for Mercosur, there were very many obstacles to its effective growth. There is an asymmetry; Brazil and Argentina are so much bigger than Uruguay and Paraguay. There is limited interaction in trade between the members; only 10 per cent of Brazil's foreign trade is with other members of Mercosur. There is a lack of commitment within the member states; Mercosur tends to be an instrument of foreign policy, being dealt with by the president and foreign ministries, rather than the economic and commercial ministries. As the noble Lord, Lord Walker, pointed out, there is no Commission; there is a limited technical secretariat—120 people are employed by Mercosur, which is not much of a basis for developing an effective institution. There are also considerable membership ambiguities. If you had read the press last December, you would have got the impression that Venezuela had been admitted. That is not the case. It has to detach itself from the Andean community before it can join Mercosur. The people I spoke to said that it would take a further five years. Bolivia was supposed to have started negotiations in December.

However, all of those existing structures are obviously affected by the announcement—to which reference was made by the noble Lord, Lord Rea—in Havana of the "Bolivarian Alternative for the Americas". It is by no means clear what that will mean in future and certainly makes it very difficult for the European Union, which I do not believe will be able at Vienna to make any progress on its negotiations with Mercosur for a proper trade agreement. Indeed, as the noble Baroness, Lady Symons, suggested, we may need to look for bilateral arrangements rather than trying to do something comprehensively, in the same way that the Americans have moved away from the FTAA towards a series of bilateral free trade areas.

One of the most positive developments of the past 20 years has been the movement away from authoritarian rule to democracy. But it is one thing to have elections, it is another thing to have effective democracies with effective relations between the executive and the legislature, effective civil services and an effective rule of law. There is still a great deal to be done in some of the countries to make the institutions of democracy work.

A recent report of the United Nations development project talked about developing a concept of social citizenship, including efforts to combat poverty and inequality, or people might get rather tired of democracy. In this respect I ask the Minister, whose enthusiasm for his work in this area I recognise and admire, as has been said by so many other noble Lords, what plans the Government have for the Chevening fellowships. They have been extremely important as a way of bringing to Britain young people who are likely to take on responsibilities in the countries of Latin America. At a lunch at the embassy when I was in Buenos Aires I met some people who had been Chevening fellows and I realised what an investment that sort of thing was. I hope that stories that they are being cut or reduced are exaggerated.

However, we need to do more. I was interested to discover that the German Foreign Minister is making a visit to some Latin American countries this week. Germany is not a country among our partners that one would have thought had a significant interest in Latin America. I refer to ministerial visits at all levels, not only those carried out extremely effectively by the noble Lord, Lord Triesman, and to the building up and extension of the work of the British Council. I am glad that the noble Lord, Lord Kinnock, was present for part of our debate and I hope that he caught the enthusiasm which we have for its work.

We also need to find ways to develop our links. I was surprised to find in both Montevideo and Buenos Aires the great friendship there is in those countries for Britain. There is a potential for co-operation and they are in many ways our natural allies in economics and politics.

I once again thank the noble Viscount, Lord Montgomery, for giving us the opportunity to have this most useful debate.

Photo of Baroness Rawlings Baroness Rawlings Shadow Minister, Foreign Affairs, Shadow Minister, International Development 4:23 pm, 4th May 2006

My Lords, I too would like to congratulate the noble Viscount, Lord Montgomery, on securing this very interesting debate. I agree with my noble friends Lord Walker and Lady Hooper that it is grand to see him back in the House and championing Latin American causes so eloquently.

This debate coincides today with Bolivia's talks with Brazil, Argentina and Venezuela, in Argentina, to discuss its move to extend state control over its natural gas assets. As many of your Lordships have highlighted today, the recent electoral victories are seen as forming part of a seamless web of leftism spreading throughout the southern and central American countries.

While the new leaders' policies vary in terms of political ideology, on the whole they are all linked to a strong populism tradition, one major common thread being that of nationalism. This has been aptly demonstrated by Bolivia's 100-day old president, Evo Morales, who ordered the military to seize the natural gas fields controlled by foreign investors over the weekend. This follows in the wake of similar moves by Venezuela's government, led by President Hugo Chavez in early April. It is of significant importance in the context of today's fragile energy climate. As we heard, Bolivia has the second largest reserves of natural gas in the region. We forget at our peril that energy demands and economic development go hand in hand with political stability. This was stressed by the noble Baroness, Lady Symons.

The Bolivian leader has said that private energy companies will have to review their contracts, selling their controlling stakes in energy to his government. During that time, the government say they will carry out audits of each company to determine how much they should pay for a stake of at least 51 per cent in each. It may not have alarmed several of your Lordships who have spoken here today, but the move has definitely alarmed Brazil and other key foreign investors. With Brazil relying on Bolivia for half of its gas, stakes will be high when they meet—especially as its state-owned energy company Petrobras is the biggest investor in Bolivia's gas fields.

Speaking recently, Bolivia's Left-wing president, Mr Morales, said:

"The pillage of our natural resources by foreign companies is over".

He also said that the gas fields were,

"just the beginning, because tomorrow it will be the mines, the forest resources and the land".

That is heady rhetoric, bearing in mind that the fate of Bolivia's gas reserves was at the heart of protests which saw two previous presidents thrown out of office.

I am afraid that I cannot agree with the argument made by the noble Lords, Lord Brennan and Lord Rea, in favour of nationalisation. Today is not the place or time to pursue it, but I look forward to another occasion when we can discuss it. Can the Minister inform the House what assessment the Government have made of the evolving situation in Bolivia and how that may affect regionalism moves in the easternmost provinces? What steps have Her Majesty's Government taken to try to promote good governance in both Bolivia and the region as a whole?

There is further concern that arises from the events at the weekend, namely the growing influence that President Chavez appears to have over the new Bolivian president who, among other things, is against open trade and regional integration. Such principles go against the very core of what Mercosur is trying to achieve in the creation of a common market and customs union between Argentina, Brazil, Paraguay, Uruguay and now Venezuela. What assessment have the Government made of the effect of the new "people's trade bloc" agreement between Cuba, Venezuela and Bolivia? How do they think this will work with regard to the aims of Mercosur?

I would also be interested to hear the Minister's comments on Venezuela's nuclear ambition a year on, considering recent events. Following the question raised by the noble Baroness, Lady Symons, can the Minister update us on the current meetings of the recent WTO that started this week, following reports in the press on Monday that ambassadors from the WTO member countries are increasingly concerned that talks are headed for failure?

During my noble friend Lady Hooper's debate last year I reiterated comments from the BBC that Brazil was,

"a gentle giant awakening, despite its continuing problems".—[Hansard, 26/5/05; col. 639.]

There can be no doubt that President Lula has made an impact. Following his predecessor's policies with regard to IMF targets and fiscal discipline, he has not just worked on slow and steady economic stability but also on social progress, inequality and poverty alleviation.

I hope that the Minister can inform the House how the Government can maintain a balance of keeping the pressure on Brazil to tackle its remaining problems while supporting its move to play a greater international role through its dynamic economy and its position as a weighty power, not only within the region but in the world.

It would be impossible to have this debate without mentioning the importance of Mexico and its influence on the group of countries who are balanced on an interdependent knife-edge where lawlessness, particularly drug-related crime, national debt, poverty and social inequality in one can easily overspill into another. There are vitally important presidential elections on 2 July, which could have a serious knock-on effect on the country's successful economy and its position as a stable pillar of democracy in a troubled region.

I have had time to pick out but a few of the countries discussed today, although the issues, both positive and negative, flow throughout the continent. Central and South America are a part of the world that we must keep high on the agenda. I support the theme of the noble Lord, Lord Giddens, that educational links are so important. I am proud that we have a very active Latin American department at King's College London. I suggest that we have another debate in six months' time, when the result of the important elections will have been declared. It is imperative that we are more active in this region and work towards maintaining good relations with these exciting, dynamic powers.

Photo of Lord Triesman Lord Triesman Parliamentary Under-Secretary, Foreign & Commonwealth Office, Parliamentary Under-Secretary (Foreign and Commonwealth Office) 4:31 pm, 4th May 2006

My Lords, like other noble Lords, I am very grateful to the noble Viscount, Lord Montgomery of Alamein, for giving the House the opportunity to discuss Latin America. I hope that the noble Lord, Lord Luke, will accept my apologies if I group south and central America as Latin America at least for this afternoon. It has been an important debate, and I appreciate his kindness and that of others for what they have said about what my work entails. I thank all noble Lords who have taken part, and it is a privilege for me to take part in the debate.

It is almost exactly a year since the last debate on Latin America as a whole, although there have been two other specific debates in that time in which I have had the good fortune to take part, all of which demonstrate the dynamism and solid intent of the noble Baroness, Lady Hooper, in making sure that these issues do not vanish. This is the moment to take stock. Several noble Lords, in particular the noble Viscount, Lord Montgomery, have talked about opportunities. He is absolutely right. Great nations who ignore these issues and have ignored them for perhaps more than a generation will turn out to be absolutely misguided; we must not miss the tricks. My noble friend Lord Howarth stressed the issue of opportunity, and he and my noble friend Lord Giddens stressed it particularly in relation to higher education, as did the noble Baroness, Lady Rawlings, just a moment ago. All of those help us to get to the right point of focus.

Some noble Lords believe that we must pay more attention to Latin America, and I agree. I make no apology for our focus on Africa in 2005, or for arguing that our involvement in Africa is long term if the millennium development goals are really to be achieved. That does not make Latin America unimportant, uninteresting or less fascinating to any of us. Old ties of friendship and trade, and new understandings of economic and cultural opportunity demand more, not less, attention. It is a dynamic, creative region with a powerful, diverse intellectual and cultural identity. The FCO White Paper Active Diplomacy for a Changing World does not list countries as much as identify the themes that we must grasp in our epoch. Most of those themes are relevant to understanding Latin America. The Government are building on an understanding that embraces the whole of Latin America and the Caribbean as well as its individual nations in all our bilateral visits to the area; in the frequent meetings that I and others have had with presidents, Ministers, ambassadors and high commissioners; in the work that we do through the European Union; and in events such as President Lula's outstanding state visit.

My noble friend Lord Brennan was quite right to remind us that as we do so we must also understand that reliance on high raw material prices over long-term aspirations and economic developments is unwise. That is part of the setting of what I want to argue. As everywhere, Latin America's future depends on successes in international markets. It is inevitable that Brazil and Mexico, our outreach partners at Gleneagles, are key strategic partners for this country in that continent. It is true for trade and for shaping the future rules of trade. The noble Viscount, Lord Montgomery, was right when he said that we are looking for the right structures and what he described as wholly honest ones.

What is fundamentally true for those countries is true for others. All face the challenges of blending security, development and human rights—the pillars of progress identified by Kofi Annan in 2005. Poor governance, instability and poverty form a vicious circle. It is against that template that we must do all our new thinking. These are complex issues. We seek a balance between a continent with less micro-economic rigidity, which constrains growth and investment and in the final analysis hurts the poor, and infrastructural investment directed at the education and health of the poor and excluded—the indigenous people to whom the benefits of natural resources and growing trade so seldom come. The noble Lord, Lord Thomas, called for understanding and care in this area and my noble friend Lord Howarth also spoke of this dual focus. Just a moment ago, the noble Lord, Lord Roper, addressed these underlying trends as well.

We live in a world shaken by international terrorism, yet Latin America has made great strides in security. It is free of nuclear, chemical and biological arms, and I believe that there is no compelling evidence that Venezuela intends to change that in terms of nuclear development. This is a continent broadly committed to non-proliferation and with little demand for missiles or warheads. The noble Lord, Lord Thomas of Swynnerton, rightly identified the persistent peace between nations on the continent. Over 20 states have binding confidence and security-building arrangements. Its troops are at the core of peacekeeping missions such as those in Haiti and the Democratic Republic of Congo, where Guatemalans heroically gave their lives for African peace.

The noble Baroness, Lady Hooper, emphasised the international role now being assumed by Latin American states, and I could not agree more. It is in Latin America—specifically in Chile and Mexico, with help from Canada—that new understandings have been forged for the UNDP report New Dimensions of Human Security, which grapples with the relationship between national and human security. The special conference on security held in Mexico in October 2003 addressed all of the questions that rightly concern us here this afternoon: bearing down on drugs and arms trafficking; poverty and social deprivation; terrorism and organised crime; guerrilla warfare and subversive organisations; environmental degradation and natural disasters. All of this work is being encouraged by Latin Americans themselves in the new architecture of the inter-American commissions.

It is true, as the noble Baroness, Lady Hooper, reminded us, that democracy is spreading more generally, is in many places sound and runs to the right timetables. Much of the work that is still needed in the democratic architecture is stirring below the surface. I also welcome the IPU's work, as did the noble Lord, Lord Roper. In just the last year, parliamentarians have visited Uruguay and Argentina, Paraguay, Colombia, Peru, Chile, Costa Rica and Nicaragua.

It is all in many ways encouraging. So why is there a sense of anxiety about this complex of development, security and human rights? What still fuels apprehension about economic development capable of lifting the continent's poorest people from abject poverty? First, of course, it is the history of instability. Since 1990, there have been five coups d'etat, social upheavals have removed eight more heads of state, and there have been 19 military crises or declared states of emergency that I can identify. My noble friend Lord Rea also reminded us of parts of that history.

The murder rate in the region is the highest in the world, with more than 25 murders per 100,000 people per year. Uruguay and Chile happily show no such problems. The victims are typically young and their deaths, whether in gang wars, or as victims of the maras in central America or narcotics racketeers in Colombia, Peru or Mexico, cost the region 14.2 per cent of GDP, according to the Inter-American Development Bank. I have not even tried to factor in the costs of robbery, abduction and child homicide.

To be sure, there are still border disputes: for example, the Belize/Guatamala territorial dispute where we support Belize's territorial integrity. But it is also true that some of the violence that we are looking at in today's debate is within and not between-states conflict; it is transnational and intra-state. On many occasions we fear that some states may turn a blind eye to some of the international criminals involved in narcotics, arms racketeering and people trafficking. But these criminals are indifferent to borders. Most significantly, they tend to populate the space left by poor governance and weak democratic practice.

That remains the difficult key to understanding much of Latin America and the Caribbean in practice. Insecurity surely results still from the fact that governments are unable to assert the rule of law in their own territory but lack a monopoly over the use of force in their territory. As ever, among the chief victims in a civil society too weak to play the necessary anchor role in national stability are trades unions, Churches, women's organisations and, tragically, young children.

What a contrast can be seen where governance is strong and economic growth has been shown to follow it. For the most part, it remains nationally strong not only where regional markets have taken root but, most importantly, where there have been real developments in the economies of those countries. I fear that the prospects of a free trade area for the Americas are still limited. Caribbean integration is just starting, as I found out in the region last week. Recent national independence continues to curtail a desire for greater economic integration. I will return to the WTO later.

Lack of key reforms and weak fiscal structures and institutions remain significant difficulties. Those are everyday systemic problems and, at times, like the key WTO rounds, are considerable barriers to progress. Thus the volatility of Latin American markets is sometimes striking when compared, for example, with emerging Asian markets. Rapid growth in Latin America has too often given way to sharp reverses. In truth, and despite some periods of remarkable growth to which noble Lords have drawn attention today, it was not until the 1980s that market-oriented policies designed to achieve any measure of macroeconomic stability were realistically attempted. The measures to remove high tariffs, import substitution, credit rationing and massively regulated labour markets were finally tried, although somewhat inconsistently. But where they have been tried the successes have been clearer. The evidence is most abundant in Brazil and Mexico, for example, which may be the reason why their true and huge potential may come to be fully realised.

I contrast that with Chile which saw through its reforms under centre-left governments shrinking national debt, lowering tariff walls and liberalising trade, a course now followed in NAFTA by Mexico. As my noble friend Lord Giddens said, Chile's economy is a remarkable model. It accompanies political liberalisation and sound social policy, which are drawn together. The impetus is gradually taking hold as budget deficits, more flexible exchange rates and better public debt to GDP ratios figure in economic planning. We can all see the benefits. For a decade from 1986 inflation across Latin America averaged more than 180 per cent. The figure for 2005 is 6.3 per cent and it is falling.

That brings us to the crucial questions posed by my noble friend Lady Symons and others. Progress on global trade talks, economic liberalisation and regional integration is vital for Latin America's development. We share with Brazil, Mexico and other countries in the region a common view of the main elements of an ambitious pro-development outcome to the WTO round. A successful round is essential to lift millions out of poverty and to integrate poorer countries into the global economy. We believe that all the main parties, including the EU, the United States and G20 now have to take the bold steps necessary to drive this through. Commissioner Mandelson continues to urge the region to integrate to a greater extent. When I last heard him speak he sought greater coherence from Mercosur, arguing that asymmetry in economies made it difficult. None the less, as the noble Lord, Lord Roper, said, whatever the shortcomings it is necessary to make the achievements. Regional integration is where it happens: a positive force for stability, economic growth and investment in Latin America.

Recent developments including the withdrawal of Venezuela from the community of Andean nations and the creation of the Bolivarian alternative, ALBA, to which my noble friend Lord Rea also made reference, which seeks to be a counter to the free trade area, have shifted the ground and made it all the more difficult. We will continue to follow those developments on regional integration in the area with interest. Negotiations with regional blocs are difficult but there have been some effective gains, some positive results in discussion with individual countries. That is most clearly illustrated by our work with Brazil on the Doha development round. I emphasise development because that is the point of the Doha round.

Will there be progress in Vienna? There are highly diverse positions. Bilateral approaches may be more successful at this stage because there continue to be fracture lines within the regional groupings. Would it be helped if educational opportunity spread more widely, as the noble Lord, Lord Giddens, suggests? The answer must unquestionably be yes, because the importance of those developments requires people capable of motoring those developments to a conclusion.

The noble Lord, Lord Walker, and the noble Baronesses, Lady Thomas and Lady Hooper, also raised the issue of China's role, and other noble Lords have mentioned it. China has a major involvement. I shall not go through the list of statistics of the extent of its involvement now, because noble Lords will already know that it is huge. Its trade alone rose by 400 per cent between 1999 and 2004 and most of the other figures show similar rates of increase. Investment has been targeted at sectors related to Chinese interests, especially oil, minerals and some transport and infrastructural projects. All of that is a picture of a profound challenge and we would be foolish to neglect it. All of us would be foolish not to try to put in the effort required, although whether anyone these days can match the entirety of China's efforts across the world in that respect is a difficult and important question.

We can see the architecture in all of that of the UK's strategic interest. We need to work on governance in the fullest sense. We need to aid those nations attempting to close down narcotics empires and trade in arms and in people. We need to work for human rights. We need to work on economic reform in the context of globalisation and to understand that we must do so in a developmental way. In short, the programmes that lift the poorest people, the most dispossessed indigenous peoples, out of poverty and all of its sickening adjuncts in violence, must be part of our programme. That is why the Government are committed to helping the region where we can. Like the noble Lord, Lord Roper, who appealed to us to make sure that our role addresses poverty, development and security, we are trying to do that. We are providing £6 million over three years under the global opportunities fund covering economic governance, climate change, energy and sustainable development; around £100 million per year in DfID development funding; £3.75 million over three years for global conflict prevention in law and order and security; and £1 million this year for tackling drugs and crime. I share with my noble friend Lord Howarth the importance of the Key West work. We should be determined to interdict drugs before they arrive on the streets of the United Kingdom. I was able to discuss that matter last week in Kingston, Jamaica, and with the Caribbean Forum.

A good deal of work is also proceeding on water. There is a high-level sustainable dialogue with Brazil, which was signed during the Brazilian state visit, and similar sustainable dialogues are going on with Mexico later this year. We aim to build a strong bilateral contact, building capacity and facilitating exchanges on those questions. My honourable friend Elliot Morley attended the World Water Forum in Mexico in March to drive forward those discussions.

The work is focused on central America, the Andes and Brazil. It covers good governance, the impact of trade on poverty, the access of the poor to markets, the benefits of legal economic activity and HIV/AIDS. The sum of £7 million a year goes to six British NGOs to support their work in the region. It is an estimable programme, although I too think that there are problems with the definition of "middle income" that may impose a limit that some would regard as restrictive. But the Government concluded that work of this kind requires a specialist department to undertake outreach into the world, rather than the type of work conducted by the FCO. I always like the moments when someone suggests huge growth in my department's resources, and I thank the noble Viscount for suggesting it. There has been a good argument for separating resources so that they do not become tangled up and our aid and trade and foreign policies do not become so confused in operation as to limit their value.

I deeply respect the 50 years of experience of the noble Viscount, Lord Montgomery, and I understand his argument that this arrangement should be reviewed. I know that some heads of mission spend money on development because they have a small element for it in their budgets. I suspect that were that element larger, they would spend a larger amount equally effectively. It is certainly true that the separation of departments exists, and I can happily tell the House that there is a good working relationship between DfID and the FCO and that my right honourable friend Hilary Benn and I meet frequently and talk pretty much daily.

Trade promotion is an important area of co-operation. My right honourable friend Ian Pearson bridges the departments of the DTI and the FCO, and I am proud of the FCO's expertise in the relevant areas. But it is always worth reviewing how we promote trade, and I shall report this discussion to the Foreign Secretary to seek his view.

I shall turn briefly to other issues that were raised. On Argentina, I respect the view of the noble Lord, Lord Luke, that growth has been fundamentally good and that there are still anxieties among investors who dislike rude shocks. Voluntary price restrictions are a difficult counter-inflationary weapon to use effectively regardless of whether they are bolstered by a ban on beef exports. They do not appear to be strong. On the issue of the isolated communities that are cut off by recent floods, there has been no request from the Argentineans for any assistance. We hold regular discussions on the south Atlantic fisheries with Argentina. The last discussions took place in Buenos Aires in December 2005 and we are talking to our colleagues about arrangements for the next talks.

The noble Baroness, Lady Rawlings, the noble Viscount, Lord Waverley, my noble friend Lord Brennan and other noble Lords raised the Bolivian hydrocarbons issue. It is a significant development. I understand that there is a meeting between the presidents of Brazil, Bolivia, Venezuela and Argentina in Brazil today to discuss the future of Bolivia's hydrocarbons industry. In advance of that meeting, I will say only that I think that the original contracts were fair. My noble friend Lord Rea raised the issue of the new arrangements that may be made, and I have no idea about them. However, it is difficult to imagine that the outright imposition of nationalisation will boost international investor confidence. I suspect that this is an issue that will need to be looked at.

As for our work in Colombia, we remain keen to see all steps taken to end the inter-community disputes. We continue to press the issues and are eager to ensure that Colombia's human rights record improves.

I will ensure that I address any outstanding questions. This has been a valuable debate which has allowed us to discuss developments in the region a year on. Our friends and even our critics in Latin America will know that we are ambitious for Latin American success. We believe that volcanic economic policy changes can devastate the prospects for investment and that with devastation the prospects for the poor get poorer. Everyone should know that today's headlines are only that—just today's headlines. It takes real leadership in any country and on any continent to distinguish between a bandwagon and a tumbril. The Government will continue to have a full agenda with Latin America. I will certainly try to take that forward in the coming year and will not lose enthusiasm. If I may say so, I do not believe that the noble Lord, Lord Brennan, would allow me to.

Photo of Viscount Montgomery of Alamein Viscount Montgomery of Alamein Crossbench 4:56 pm, 4th May 2006

My Lords, I have only a minute or two in which to reply, so let me first thank all noble Lords who have spoken, particularly for their very kind remarks about me personally, but also for the extraordinarily wide range of this debate. It is quite clear that we have covered not just the whole continent but also a vast number of the individual countries. From what the noble Baroness, Lady Rawlings, said, it would clearly be a good idea to have some more debates, but perhaps we should narrow the focus for the next one. She and, indeed, all noble Lords can rest assured that while there is breath in my body I shall be pursuing this cause.

In particular, I should like to thank the noble Lord, Lord Triesman, for his comprehensive comments. I am sorry that he did not like the idea of a powerful Foreign Office because I think that that would be beneficial, but I have no doubt that I shall pursue the matter. I look forward to further encounters on this idea because we will come back to this issue. The noble Lord, Lord Triesman, should and, I hope, will be promoted, because we need him. We need his ideas and we need the Foreign Office, so let us go forward in the hope that great things will happen. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.