Brazilian and Canadian officials are hoping a new high-level, inter-governmental dialogue will provide a way of sidestepping problems within Mercusor and negotiating freer trade between the two countries.
Two weeks ago, representatives from 17 Canadian governmental organizations met with their Brazilian counterparts during a visit to Ottawa that was led by Brazil's deputy minister of foreign affairs, Antonio de Aguiar Patriota.
One result of the visit was the decision to create a Strategic Partnership Dialogue (SPD) between Brazil's foreign minister and his Canadian counterpart.
"The idea is to have both foreign and trade ministries sitting side by side to openly discuss not only trade, but all aspects of the economic and social relationship," said Ernesto Araujo, deputy consul at the Brazilian Embassy in Ottawa.
The SPD will "complement" the Joint Trade and Economic Council between the two countries, which had been largely abandoned but was recently re-formed, Mr. Araujo said.
"It's a rather informal approach, where you can have top-level people sitting and thinking what can be done, and generating ideas. There's no predefined goals or predefined objectives," he said.
The SPD aims to become ground zero for discussions between and amongst the private sector and government officials from both sides, in order to generate increased trade and investment.
Perhaps most importantly, the SPD also aims to provide an informal framework for sidestepping the problem of negotiating an official free trade agreement.
Canadian think tanks have talked for several years about the possibility of free trade with Brazil, but there are several issues that make this nearly impossible. One major factor is that Brazil is part of Mercosur, a regional trade pact with Argentina, Paraguay and Uruguay that forbids bilateral free trade agreements.
Another factor is regulation of industry sectors, such as the Canadian supply management system of dairy and poultry. Any negotiations for formal market access provisions within this environment of trade blocs and industry regulations inevitably falls apart, said Brazil's ambassador to Canada Paulo Cordeiro de Andrade Pinto.
Combining these two notions, he provided a hypothetical example of Uruguayan cheese exports. Uruguay exports a lot of cheese to Brazil, he said, and they want to export to Canada as well. But if Brazil negotiated a trade agreement with Canada to export cheese, it would have to do so through Mercosur, and the Uruguayans would cry foul.
Thus supply management is "an impediment to certain things that we would like," said Mr. Cordeiro.
"We understand but we do not always accept. There is a difference between understanding a situation and accepting a situation," he said.
The SPD aims to work around these limitations by promoting trade through other channels. Governmental departments are brought in to pinpoint any tweaks that could be made.
"A strategic dialogue like that can direct our officials to talk, for example, to finance ministries. Sometimes it's not even a law, it's a regulation. You can adjust to make the channels friendly," he said.
Last year, Canadian consular and trade officials in Brazil organized a visit of officials from Brazilian energy company Petrobras to Canada to showcase suppliers that could sell to them. And next month, the Atlantic Canada Opportunities Agency and the Atlantic provinces invited businesses to Brazil for a series of meetings, networking and information sessions, visits to Canadian consulates and participation an in Atlantic Canada exhibition.
The SPD hopes to co-ordinate more of these visits.
One agency present at the meeting with the delegation was Export Development Canada. Spokesperson Phil Taylor said EDC may be involved peripherally to discuss its experience as a commercial trade facilitator with Brazil, but that "we're just a small part of the process," pointing to the department of foreign affairs as a potential organizer.
DFAIT did not respond to questions by press time.
Canada 'not on radar screen' in Brazil
Despite increased dialogue, Canada-Brazil observers say the two countries have many obstacles to overcome if the relationship is to flourish.
"It's a narrow relationship now. You're talking about two extremely diversified economies. And clearly there's a large number of companies that may find opportunities, but in terms of trade we cannot talk of any interdependence," said Latin American specialist Jean Daudelin, who teaches at the Norman Paterson School of International Affairs at Carleton University.
"Brazil is an agricultural superpower," he said. "They are extremely efficient on ethanol, for instance, their technology is much more efficient than anything we use here. If things were to open in those areas, if Canada were to fully open on agricultural goods, I think Brazil could get in much easier. But there are serious political obstacles to Canada's liberalizing in that sector."
Given the trade obstacles, Mr. Daudelin suggested that the pro-trade agenda is being "largely driven by governments because there's no big interests except in some narrow sectors," such as financial services and mining.
He noted that Mercosur is "an awkward bloc to reach agreements with," given its multilateral framework, and that even though the SPD aimed to discuss social issues, he doesn't envision "a common social agenda between the two countries at this point in time."
"The fact that Brazil sent this whole planeload with a deputy minister is remarkable. It's not the kind of thing that they have done in the past, or that they do a lot," he said.
"[But] public commentaries, academic papers and so on, Canada's not on the radar. There's no reason for Canada to have an important place in all this."
Centre for International Governance Innovation research fellow Annette Hester said the upcoming Brazilian governmental elections have the country inwardly focused. In October, popular President Luiz Inácio Lula da Silva, in power since 2003, must step down after two terms in office.
"It's a moment where, regardless of Brazil's interests, Brazil is basically in a full-out election campaign. It's not like we are going to command Brazil's attention for any substantial deal at this stage," she said.
But she welcomed the SPD, saying "it's wonderful that there is an ongoing dialogue between the two governments."
"Canada has said that it has developed an overall approach to the Americas. The overall approach as far as Canada is concerned, does not include Mexico because Mexico is part of our North America desk. So considering that...not to have concerted engagement with Brazil is a major weakness of the Americas strategy," she said.
"The fact that the government is making attempts to address that, and have an ongoing dialogue with Brazil, I can only see it as a welcome step."